How Often Should You Remortgage

Remortgaging can be a strategic financial move, allowing homeowners to secure better interest rates, reduce monthly payments, or release equity from their property. However, determining the optimal frequency for remortgaging can be challenging. While some experts suggest reviewing your mortgage every few years, the decision ultimately depends on various factors, including current interest rates, your financial goals, and potential fees. In this article, we will explore the considerations involved in deciding how often to remortgage, providing insights to help you make an informed decision that aligns with your unique circumstances.

Understanding the Optimal Frequency for Remortgaging

Remortgaging is a financial strategy that homeowners use to replace an existing mortgage with a new one, often to take advantage of better interest rates or to borrow more money against their property. The question of how often one should remortgage doesn't have a one-size-fits-all answer, as it depends on various factors including personal financial circumstances, market conditions, and the terms of your current mortgage.

Evaluating Your Current Mortgage Deal

Before considering remortgaging, it's crucial to evaluate the terms of your current mortgage. Look at the interest rate you're paying, the remaining term of the mortgage, and any penalties for early repayment. If you're on a standard variable rate (SVR), you might find that remortgaging could offer significant savings.

Monitoring Interest Rates and Market Trends

Interest rates play a pivotal role in the decision to remortgage. Lower interest rates in the market can lead to substantial savings over the term of the mortgage. It's advisable to keep an eye on the Bank of England's base rate and overall market trends to identify a favorable time to remortgage.

Factoring in Early Repayment Charges

Many mortgage deals come with early repayment charges (ERCs) if you remortgage before the end of a fixed or discounted rate period. These charges can be significant and might negate the benefits of remortgaging. It's essential to factor these costs into your decision-making process.

Considering Your Financial Goals and Personal Circumstances

Your personal financial situation and goals are key in determining how often you should remortgage. If you're looking to reduce monthly payments, change the term of your mortgage, or release equity, remortgaging might be a suitable option. However, if your current mortgage aligns well with your financial plans, frequent remortgaging might not be necessary.

Assessing the Impact on Your Credit Score

Each remortgage application involves a credit check, which can temporarily impact your credit score. While one application might have a minor effect, frequent applications in a short period could negatively affect your creditworthiness. It's essential to space out remortgage applications and only apply when necessary.

In summary, the optimal frequency for remortgaging is influenced by a blend of personal financial circumstances, market conditions, and the specific terms of your mortgage. It's advisable to regularly review your mortgage and stay informed about market trends, but always consider the broader impact of remortgaging, including potential fees and effects on your credit score.

FAQ

How often should you remortgage your home?

Remortgaging your home is a significant financial decision that should be made after careful consideration. Typically, it's advisable to consider remortgaging every 2 to 5 years, or when your current mortgage deal is about to end. This is because most mortgage deals have an early repayment charge during the initial period, which can be quite costly. However, the frequency can vary depending on your personal circumstances and the state of the market. If interest rates have dropped significantly, it might be worth remortgaging before your current deal ends to take advantage of the lower rates.

What factors should you consider when deciding to remortgage?

There are several key factors to consider when deciding to remortgage. Firstly, are the interest rates lower than what you're currently paying? Lower interest rates could potentially save you money over the term of your mortgage. Secondly, consider the early repayment charges on your existing mortgage. If these are high, remortgaging may not be cost-effective. Thirdly, factor in the fees associated with remortgaging, such as arrangement fees, valuation fees and legal fees. Lastly, consider your long-term plans. If you're thinking of moving in the near future, remortgaging may not be the best option.

Can remortgaging save you money?

Yes, remortgaging can potentially save you money, particularly if you're moving from a mortgage with a high interest rate to one with a lower rate. This is because your monthly payments could decrease, leaving you with extra money to save, invest or spend as you wish. However, it's crucial to factor in any fees associated with remortgaging to ensure that the overall cost doesn't outweigh the potential savings. Using a remortgage calculator can help you work out the potential savings and costs involved.

What are the risks associated with remortgaging?

While remortgaging can have financial benefits, there are also potential risks to be aware of. Firstly, if you extend the term of your mortgage when you remortgage, you could end up paying more in interest over the long term. Secondly, if house prices fall, you could find yourself in negative equity, where the size of your mortgage is greater than the value of your property. Thirdly, there may be fees involved in remortgaging, such as arrangement fees, valuation fees and legal fees, which can add up. Lastly, if you remortgage to borrow more money, you need to ensure that you can afford the increased repayments.