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8 Feb 2019

Remortgaging: an alternative way of making more money, without increasing your rent

Author: Grace Watson

With around one third of all home loans made in the UK being remortgages, streamlining your debt and keeping it under frequent review is clearly a hot topic. There’s a common misconception that remortgaging is expensive, but it doesn’t have to be.

“With mortgage lenders cutting interest rates and offering incentives such as cashback on remortgaging deals, now could be a great time for landlords to consider refinancing their buy-to-let portfolios,” explains Romans’ Group Financial Services Director, Mark Hughes.

“As the property market continues to change and with investors facing the prospect of slimmer profit margins, many of these products focus on reducing the up-front costs of remortgaging, or saying ‘thank you’ though means such as cashback.”

Here’s our top reasons for considering a remortgage this spring:

Remortgaging can save you huge sums of cash

We are all excellent at spending money, but nine times out of ten we’ll shop around for the best deal before committing to a large purchase, such as a car or a holiday. For many of us, a mortgage is – and may always be – our biggest financial commitment. Therefore, streamlining this often huge debt can be imperative if saving money is on your agenda. With the right advice and mortgage product, one simple remortgage could potentially save you £1,000s every year moving forward.

 

Why should you remortgage?

For many people, the primary reason for remortgaging is to save money by securing a rate moving forward, thus eliminating the potential of financial surprises later down the line. However, there are other reasons to consider:

  • Your current deal is about to expire. The typical length of mortgage deal on a fixed, tracker or discounted rate is between two and five years. Therefore, when this comes to an end, you’ll likely want to avoid reverting back to your mortgage lender’s standard variable rate. The chances are, this rate will be higher than your previous rate and more expensive than new deals on the market. Our advice? Start searching for new deals around four months before your tariff ends.
  • You’re after a better rate. If you’re tied into an initial deal then you may be entitled to pay an early repayment charge, or redemption penalty. This can often be costly – anywhere between 2% and 5% of your outstanding loan. However, this doesn’t mean you should discount shopping around for a better rate as the savings on a new tariff can be huge, particularly if you have a high loan to value (LTV).
  • Your property is worth substantially more than when you agreed your mortgage. If your property’s value has skyrocketed since you took out your mortgage, you’re definitely missing a trick if you haven’t already searched around for a better mortgage deal. The chances are, you could find you’re now in a lower LTV band, meaning you’re eligible for cheaper monthly repayments.
  • You’re concerned about interest rates rising. With confusion around the effects of Brexit still circulating, many people are considering the possibility that base rates could rise once more. If the Bank of England base rate rises, this could affect your monthly repayments, specifically if you’re on a tracker rate, so shopping around for reasonable fixed rates could be worth considering.
  • You want to borrow more. If you’re considering ways to expand your property portfolio, remortgaging some or all of your current mortgage deals to a new lender might just mean you can raise funds by paying lower rates across your portfolio. However, it’s important to keep note of the fees you’re expected to pay by doing so.

If it sounds like remortgaging could be the right move for you, we recommend you start searching for a new deal as soon as possible, to ensure it’s locked in ahead of any interest rate rises. For impartial advice on buy-to-let mortgages, or to explore your remortgage options, contact Romans Mortgage Services on 0118 3219 536.

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