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Is now the right time to remortgage?

Is now the right time to remortgage?

Category: Mortgages

Updated: 09/08/2010
First Published: 09/08/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Interest rates might have been at the record low of 0.5% for 18 months in a row, but there is one thing that is certain when the Bank of England does decide it is time for a change – the only way is up!

Thousands of homeowners have been reaping the benefits of low mortgage repayments over the last year and a half.

Many of those that have seen their mortgage deal come to an end in that time have happily reverted to their lender's standard variable rate (SVR), and enjoyed lower monthly repayments as a result.

However, once the base rate does start to rise, SVRs will inevitably follow and it is almost certain that the cost of even the best mortgage deals in the market will start to rise too.

For some, staying on their SVR might remain the best thing to do for a good while to come.

For others, however, it is reasonable to suggest that now might be the time to remortgage to a new mortgage deal, before the rates start to rise.

As well as helping to reduce mortgage repayments, remortgaging can also be an effective way to raise money for home improvements, or perhaps a holiday or new car.

In some instances, it might even be possible to raise some extra cash, yet still end up paying less in monthly repayments.

People with other debts to their name might also benefit from bringing them all together under the wing of their home loan.

Although the mortgage rate will play a major part in whether the time is right to remortgage, other factors need to be taken into account too.

Arrangement fees, valuation fees and legal costs all need to be considered, while there could also be exit fees to leave an existing mortgage deal.

Careful consideration is also required regarding the type of mortgage that will be moved to.

Fixed rate mortgages guarantee a certain rate will be payable for a set period of time. For instance, Yorkshire Building Society currently offers an excellent fixed rate mortgage deal fixing the rate of 3.09% to 30 September 2012. The deal is open to those remortgaging with at least 25% equity in their property and has an arrangement fee of £300 and booking fee of £195. Valuation fees and legal fees are, however, free.

As the name suggests, variable rate mortgages can see their rate vary, usually depending on movements in the base rate.

A good example of a variable rate mortgage which will vary over the remaining term of the mortgage is the 2.49% variable rate currently offered by First Direct. It is open to homeowners looking to remortgage who have at least 35% equity in their homes and has a booking fee of just £99.

Alternatively, ING Direct is currently offering a discounted variable rate deal which is guaranteed to be 2.60% until 31 August 2012. This is a 0.9% discount on the lender's standard variable rate of 3.50% which will become payable for the remainder of mortgage term from September 2012.

Interested borrowers will need to have at least 30% equity in their home, but there are no additional product fees.

Whichever way you decide to go, the key to successfully remortgaging is to shop around for the right deal.

If you can't find what you are looking for in our Mortgage Best Buy charts, why not get a
free no obligation mortgage quote with our partner Mortgage Solvers.

They will make sure you can get expert help and advice to find the best mortgage deal to suit your individual needs.

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.