Why you should remortgage 6 months early
Posted on 20th November 2024 at 17:23
We often get asked by current and potential clients when they should think about their upcoming mortgage renewal. Is it best to wait until nearer the term or get it done and dusted as soon as possible? But when is too early and when is the best time? Because doing it too early will mean your mortgage offer will expire before you switch over, or you switch over too early and incur fees for leaving your mortgage early.
The ideal time is within 6 months of your current deal expiring. The reason being is that any mortgage offer you secure is valid for 6 months only. If you submit an application sooner than this, you will either leave your current mortgage deal early to move onto this new mortgage and incur early repayment charges on your current mortgage. Or you the new mortgage offer will expire before you come to move over.
Apart from the fixed 6-month mortgage offer window, why else would you remortgage as soon as possible within that window?...
Secure a rate before rates increase.
With market volatility rates fluctuate on a weekly basis. The safest way to secure the best mortgage deal possible is to secure the best rate available today, rather than waiting for rates to drop.
There is no guarantee interest rates will drop, they may in fact go up. If you are waiting for rates to drop and then they increase, you will miss out on a better deal due to inaction.
You can switch rate if rates drop.
If interest rates drop after your mortgage application has been submitted, your adviser can go back into
your application and request that the interest rate selected be changed to the new lower interest rate they
have on offer. So, the rate you initially selected may not be the rate you end with on completion. The
lender cannot change the rate after your application has been submitted, but you and your adviser can.
So, any time an improved option comes along you can switch to that new option with no questions asked.
Plenty of time to gather up to date documents – if self employed
If your renewal date window falls around the same time your self-assessment or your company accounts are due, you can push through your new accounts or delay your mortgage application so you have up to date documents ready for your mortgage application.
This may be a benefit to you if you know your latest set of accounts are going to show a higher figure and therefore increase your mortgage affordability.
This can be an even greater benefit if you moved to self-employment after your initial mortgage application went in and you do not have 2 years’ worth of accounts ready for your remortgage application.
Contest valuation.
Occasionally a property valuation can return with a lower figure than anticipated which will alter the loan to value of your application and the mortgage products available to you. By having 6 months before you need to complete you have time to contest the valuation with the lender or try a new lender all together with hopes of getting a different valuation by a new lender before the standard variable rate kicks in.
Plenty of time to complete application and legals.
Just like when you bought the property in the 1st place the new lender will want to have a legal charge over your property.
If you are moving from one lender to another you will need to go through the legal process of having this charge amended. But unlike when you bought the property in the 1st instance, this process is much easier and less labour intensive. So much so a lot of lenders offer a ‘Free legal service
as an incentive to choose them as your new lender.
The free legal service can often be slower as those solicitors are working on 1,000s of cases at a time. This reinforces the need to use the full 6-month window to give you all the time you need to complete the paperwork ready for completion on the date
your current mortgage deal comes to an end.
Reduce the stress of the impending standard variable rate.
All mortgages move onto the lenders standard variable rate at the end of their fixed rate or tie in period.
The standard variable rate changes multiple times a year (typically when they Bank of England base rate changes or the lender reviews their lending policy) and this is usually much higher than the fixed rate you selected.
This is the main driver for people to remortgage so that you do not much onto this rate which will cost you more money for the same borrowing.
By having all of your paperwork and legals completed in good time your new mortgage deal will kick in the day after your current mortgage deal ends.
This is the earliest you can switch your mortgage over without incurring early repayment charges (because you havent left early) and means you do not much onto the standard variable rate so you will not see a higher monthly payment between each deal.
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