Coronavirus and remortgaging: Is now a good time to switch?
With interest rates at an all time low, homeowners looking for a cheaper deal are wondering whether now could be a good time to seize an opportunity for savings. But is now a good time to remortgage and is there someone who can calculate all this for you?
What is remortgaging?
Remortgaging is a process that allows borrowers to switch from their current mortgage deal onto a new one. This is typically done to reduce monthly repayments, or to borrow more money against the property.
Typically, mortgage providers will offer attractive initial rates to draw borrowers in. However, these rates will often only last for a few years before the provider puts them onto a Standard Variable Rate (SVR).
Interest rate update during Covid-19
On March the 10th 2020, the Bank of England (BOE) reduced their rates by 0.50% from 0.75% to 0.25%.
As the coronavirus continued, in another shocking turn of events, the BOE reduced their rates even further to 0.1%.
The announcement isn’t great for savers but buyers could now benefit from lower borrowing rates if lenders follow suit and continue to reduce their already unprecedented low rates.
Could remortgaging help me save money?
There are lots of reasons why you might be considering remortgaging although saving
money is often a priority for many understandably.
Many people are facing financial uncertainty, wondering how they can make their now reduced incomes stretch to cover their mortgage and other expenses.
Depending on your circumstances, switching your mortgage could provide a solution, helping you find a more affordable deal, with smaller monthly repayments.
Do I have to use a new lender to remortgage?
No, you can apply for a re-mortgage with any lender if you meet their eligibility criteria. Your current lender may be able to offer you a better deal, however it’s always worth checking elsewhere.
As well as a savings opportunity, remortgaging could also allow you to find an agreement with more favourable terms and conditions. Your broker can check your current mortgage contract and compare it against other lender agreements to make sure you get a mortgage with terms that work for you.
Your broker works on your behalf to find you the best deal whether that be with your current lender or through a remortgage with another bank.
Can I remortgage my property to free up capital during coronavirus?
Understandably, with many households facing a dip in income because of the effects of Covid-19, some homeowners are considering remortgaging to free up capital and release funds.
This is a huge financial decision that should never be taken without professional guidance, so we would always recommend seeking the advice of a remortgaging broker. They can explore your options and explain which one could be better for you and your situation.
Will there be remortgaging charges if I switch?
You may have to pay an early repayment charge to your existing lender if you remortgage. The cost of this will vary depending on your lender and mortgage, so check your terms and conditions for details about fees.
When deciding whether to remortgage during the coronavirus, the fees that you may incur should be a key factor to consider. After all, the cost of remortgaging could outweigh the savings made from finding a better rate.
Are there other options?
If you’re unsure about remortgaging or feel that you’re not in a position to do so, there may be other routes including a secured loan, also known as a second charge mortgage.
This type of financing usually involves your property being used as security in the event that you default on your repayments, so always consider your affordability and the potential risk before signing an agreement.
You might also want to consider:
Switching to an interest only mortgage
Extending the repayment term of your current mortgage
For more information, check out our article on paying your mortgage during Covid-19 or feel free to contact us with your questions. Our team understands that this may be a concerning time and can help with clear and independent advice.