Could remortgaging help you to beat the cost of living crisis?

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Headlines are ablaze with reports detailing the intensifying cost of living crisis. The surge in inflation, escalating interest rates, and soaring energy prices impose a significant financial burden that even the most financially prudent households cannot overlook.

In light of this economic turbulence, many families are seeking strategies to navigate these challenges and regain control of their finances. Amidst the uncertainty, there exists a potential solution – remortgaging.

Remortgaging presents itself as an effective maneuver to alleviate monthly expenses while awaiting economic recovery. This financial strategy involves transitioning from an existing mortgage to a potentially more cost-effective one on the current property.

Given that a mortgage typically represents the most substantial financial commitment, remortgaging mirrors the significance of the initial mortgage decision. With numerous options available and a commitment period spanning several years, it is essential to comprehend the intricacies of remortgaging and the pertinent factors to consider.

Various reasons may prompt a homeowner to contemplate remortgaging:

  • The current mortgage term is nearing its conclusion, necessitating a transition from the lender's standard variable rate (SVR), typically associated with higher interest rates.
  • To reduce monthly repayments and manage finances more effectively without additional borrowing.
  • Desire to overpay due to changes in financial circumstances, constrained by the current mortgage provider's restrictions.
  • Need to increase borrowing for significant expenses like moving house, home improvement projects, education fees, Buy-to-Let investments, or debt consolidation.
  • The property's value has appreciated, potentially qualifying for a cheaper mortgage due to a lower loan-to-value (LTV) ratio.
  • Changes in the Bank of England base rate prompt a search for a more competitive rate, especially if currently on a variable rate mortgage.
  • Seeking stability in payments by transitioning to a fixed-rate deal, ensuring predictable monthly expenses amidst changing circumstances or anticipated rate hikes.

Selecting the opportune moment to remortgage is crucial. Periodic review ensures securing the most favorable deal and payment terms. Planning in advance, preferably six months before the fixed deal ends, allows ample time to explore the market and facilitate a seamless transition to a better deal.

While remortgaging can potentially reduce monthly interest payments and offer competitive deals, switching before the current mortgage deal ends may incur penalties. It's essential to conduct a comprehensive cost analysis to determine if potential savings outweigh associated penalties.

Navigating the remortgage process typically takes between 18-40 days from application to mortgage offer, although timelines can vary. Evaluating the current mortgage terms, including type, interest rate, remaining repayment period, and monthly payments, is critical in determining potential savings. Legal assistance is necessary unless remortgaging with the current lender, necessitating the engagement of a conveyancing solicitor.

Arrangement fees can be paid upfront or added to the loan, but the latter may increase overall costs over the mortgage term due to accrued interest.

For homeowners locked into a specific mortgage deal but seeking to access equity or reduce monthly payments, remortgaging with the current lender over a longer term is an option. However, this approach may elevate the overall cost of the mortgage over its lifetime.


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