Why 2015 is the year to remortgage
Mortgage interest rates remain at an all time low, house prices continue to rise, lenders continue to compete for business and despite a tightening in the mortgage regulations last year, these other factors mean borrowing money is proving, on the whole, successful. Are you making hay while the sun shines, and paving the way to lower mortgage costs in the future?
This does not constitute advice and advice should be sought in all instances before acting on it.
Your property may be at risk should you be unable to maintain any agreed mortgage payments over the term agreed.
The many reasons to remortgage
Homeowners are remortgaging to simply secure a better rate of interest or a better lender for the long-term, and many are already saving hundreds of pounds on mortgage repayments from switching. If your house has gone up significantly in price you may now fall in a lower “loan-to-value” (LTV) band, opening up new lower rates.
Other homeowners are taking advantage of increased property prices combined with the low rates and either selling-up to relocate, releasing money from their property for reinvestment, or borrowing more money for property improvements.
There are plenty of options available, specifically for doctors and dentists who can prove good levels of income.
The results for mortgage lending just keep on improving. The British Bankers Association (BBA) reported, for July 2015, the highest lending levels since the start of the financial crisis in 2009, with over 46,000 mortgage approvals. This was an 11% increase on July 2014 and a 3% increase on June 2015.
Remortgages also reached a four-year high with many homeowners now spurred into action at the prospect of a rate rise.
Subsequently, the Council of Mortgage Lenders (CML) reported in August 2015 that mortgage lending exceeded £20billion, an 8% decrease from the super month of July, but a 12% increase from August 2014.
“Mortgage lending is currently enjoying its best spell since 2008, on the back of a pick-up in house purchase and remortgage activity over the summer months,” Bob Pannell, chief economist at the CML
OUTLOOK – future prospects
Lending is expected to continue at a steady pace until the end of the year. A suspected rise in the Bank of England (BoE) rate means those who have not already remortgaged will most likely to have to take action in the very near future so as not to miss out on the opportunity of saving cash or restructuring their mortgage arrangement,
Several lenders have already started to make small increases in their fixed rates, in advance of the BoE, to even out the gaps.
Remortgaging for reinvestment – considered a buy-to-let?
A buy-to-let investment used to be just for entrepreneurs looking to grow a property portfolio. However, now with a widening in the market, many homeowners are using this opportunity to cash in.
There is a growing population of homeowners who are releasing money from their own property for another bricks and mortar investment.
A survey by Barclays showed the key reason for three quarters of buy-to-let investments was now to secure income and wealth for their family’s lifestyle and retirement.
“The increase in remortgaging over recent years is a reflection of changes in the wider consumer market” Nick Clark, Homebuyer Show
The right property and the right area are important factors, as always, but landlords can now also take advantage of a more flexible “rental calculation” as part of the buy-to-let mortgage application.
This is particularly useful for London based property investors where house prices are high but the rent doesn’t always correspond to the right LTV. The new style calculation allows more flexibility in this respect.
Using your home to increase your loan
If a property has built up sufficient equity, there is often the option to remortgage to release funds for home improvements, debt consolidation or other personal desires, say a new car.
Lenders will want to know what the extra cash is going to spent on and the usual affordability calculations will apply to the new loan value.
However, homeowners are using their higher property values to enable a higher loan-to-value and therefore further lending.
Would a remortgage suit you?
A remortgage isn’t for everyone – there are clear reasons why not to switch lenders as well. Maybe you have an excellent rate or maybe you only have a small amount left to pay, in which case moving may not profit. Maybe there is a high early repayment charge or possibly there has been a change in your circumstances since first mortgaging; going self-employed is an example of this where sufficient proof of income is lacking.
Think about remortgaging if the following apply:
- I am keen to secure a better rate before any rate rise
- My mortgage deal is coming to an end
- My home value has increased by a lot
- I want to switch from interest only to repayment mortgage
- I want to release cash from my home for new investments
- I want to borrow more money against my home
- I want more flexibility, like making lump sum payments
Remortgaging may not be for you if the following apply:
- My mortgage debt is very small
- I have a high early repayment charge
- I have recently gone self-employed
- My home has dropped in value since I bought it`
- I don’t have much equity in my property
- I recently had credit problems
- My rate is already excellent
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