When is the right time to remortgage?

A question asked by every homeowner out there, especially with mortgage rates constantly being in the news, causing panic and concern for people coming towards the end of a fixed rate.

In actual fact the right time really is down to personal preference, and everyone’s individual circumstance/desire for what they want to do with their remortgage.

Now you’re probably thinking, that doesn’t help with answering my question of when should I remortgage. Well let me explain.

The earliest possible time anyone can remortgage, and avoid having any penalties, is 6 months before the fixed product end date. You can of course remortgage sooner than this, but you then have to consider exit penalties on your loan. This is industry standard being 6 months, and will apply for every lender.

This is where it can get a bit complicated. So, let’s break it down.

When you remortgage, you have 2 main avenues you can consider:

• Staying with the same lender

• Remortgaging to a new lender

There are of course different tranches of options that can come off of these, but these are the 2 main types.

This 6-month rule of remortgaging, only applies when it comes to a new lender.

The reason for this? Mortgage offers are valid for 6 months!

Securing it any earlier would cause the offer to expire and mean you’d have to secure a new rate again before completion. So, if you’re wanting to be extra organised this time around with your remortgage, lock in a rate 6 months out, get the added protection it gives you against market volatility and sit back with your feet up.

Being organised isn’t the only reason to do this early though. For some people they like to use their remortgage as a tool. You’re probably thinking, a tool?! What on earth is he on about. Well, the remortgage can be used for a number of things, not just getting a better rate. Things like:

• Taking equity out for home improvements

• Paying for school fees

• Debt consolidation

• Reducing your term

• Making a large overpayment

The list really does go on, and can really be used to your advantage should you want to. If you’re looking at any of these, then again, the sooner the better and the 6-month rule will be the most applicable to make sure you get the right numbers suited and tailored for you.

Now, this is where a spanner gets thrown in the works. Staying with your same lender. During the era of Covid, lenders extended their window to lock in an existing customer rate to 6 months- to match the option of new lenders, and to try and help calm people’s nerves in a world that was becoming more and more chaotic.

Since then, lenders have resorted back to their old ways and dropped that window of time down to (mostly) 90 days before the end date of your current product.

So you’re probably thinking, what’s the issue with that? Well in reality, there isn’t an issue, but this is where the personal preference part comes in.

Some people don’t want to go through the “hassle” of changing to a new lender. But want to still lock in or at least see what a new rate would look like. So, you can start looking 6 months before, but you won’t be able to get a true comparison of the market, because your existing lender won’t have unlocked their rates for you yet.

You then end up kicking the mortgage can down the road for a few months and start to look again at the 90-day mark. For some people, they may want to lock in a rate with a new lender, and then re-evaluate closer to the time and see what their current lender is offering. Again, this isn’t a bad way to do it, but be warned that when you change lenders, a new hard check is done on your credit report, paperwork is needed from you, applications are submitted, legal work is started etc. etc. As you can see, it’s not just a quick lock in a rate and then cancel it if something better comes along.

So, to come back to the original question at hand, the answer does still remain that the right time really is down to personal preference. The key part- engaging a broker early.

Start these conversations and work with someone that can guide you through and help to explore these avenues. If you’re looking to do anything different with your mortgage, then the 6-month mark is a good place to start. Personally, I would engage with a broker 4 months before. Close enough to the 90 days that it is still fresh in your mind, and still plenty of time to have the legal work done and most importantly avoid the variable rate.

As you can probably tell- remortgaging isn’t always as straight forward as you may think it would be!

The key? Get in touch today and let us take away this complication for you.