There’s a chance your current mortgage could be coming to an end at some point in the next few months, and you may be considering switching to a new deal to ensure you still benefit from competitive rates.
If this is on your radar, then you’re not alone – according to the Guardian, more than 1.4 million people will remortgage over the course of 2023.
While a remortgage can be a fantastic opportunity to obtain a better deal on your existing mortgage, it’s important to be aware of some frequent pitfalls before you dive into the process. Otherwise, your plans could be derailed, or you could be left paying higher rates or fees.
So, continue reading to discover four of these common mistakes you could make and some ways to potentially avoid them.
1. Not starting the remortgaging process early
A remortgage can typically take several weeks or months to conclude. So, if you leave things to the last minute and fail to source a new mortgage deal before your current one expires, you may end up on your lender’s standard variable rate (SVR), which is usually uncompetitive compared to other deals.
Indeed, according to MoneyWeek, the average SVR is 8.09%, while the average two- and five-year fixed-rate mortgages are 6.67% and 6.17%, respectively.
MoneyHelper’s mortgage calculator highlights how much more you could pay if you reverted to your lender’s SVR.
If you had a £200,000 capital and interest mortgage over a term of 25 years, you would pay £1,317.74 a month on the average two-year fixed-rate deal of 6.67%.
However, if your deal expires and you’re placed on the average SVR rate of 8.09%, your payments would rise to £1,555.58 a month – more than £2,200 in extra interest costs each year.
As such, it may be prudent to start considering your remortgage around six months before your current fixed- or tracker-rate deal ends.
By doing so, you could give yourself enough time to secure a new deal before your existing one expires, ensuring you aren’t left on your lender’s SVR for an extended period.
2. Taking out new loans and applying for credit before remortgaging
Even though borrowing money responsibly and repaying any loans on time can boost your credit score, it may be wise to avoid doing so before remortgaging.
This is because lenders will assess your affordability and spending habits when you apply for a remortgage. If you’re constantly taking out new credit – especially short-term loans – they may assume you’re too reliant on borrowing and could deem you a higher risk.
Additionally, a “hard” credit search will be conducted each time you apply for a loan. These leave a footprint on your credit report and can be seen by any future lenders.
Moreover, you may want to avoid other red flags before you remortgage. For example, if your bank statements show debits to gambling companies or payday loans, or you have made late payments or defaulted on an existing credit agreement, you may find it harder to secure the deal you want.
3. Remaining loyal to your existing lender
It may seem convenient to remain with your current lender when your deal ends, especially if you’ve been with them for some time.
Taking a deal from your existing lender is called a “product transfer”, and, while it may seem straightforward to stick with your current lender, this loyalty could potentially lock you into an uncompetitive deal.
When you opt for a product transfer, you’ll only have a choice of deals from your current lender. Meanwhile, there could be significantly cheaper or more appropriate options available with other lenders in the wider market.
Just as you would shop around for other financial products on renewal, it’s important to search for mortgage deals rather than simply accepting a “loyalty” product.
Of course, this isn’t to say that you must find a new lender – product transfers could be quicker since you typically won't need to go through the underwriting process.
However, it’s always worth shopping around and sourcing a deal that best suits your current financial situation, whether from your existing lender or a new one.
4. Not seeking professional advice before you remortgage
As you can see, remortgaging is a significant financial decision. As such, it’s worth seeking advice from a professional before you switch your home loan.
If you don’t, you may end up on an uncompetitive rate, face higher fees, or commit to a deal that doesn’t align with your financial needs and future goals.
This is where we can help. Rather than navigating the remortgaging process alone, our expert mortgage advisers could ensure you find a deal that suits your financial requirements.
Moreover, we will scour the market for you, saving you time and taking some of the stress and hassle out of the remortgaging process.
To discuss this more, please email enquire@london-money.co.uk or call (0207) 808 4120.
Please note
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
Think carefully before securing other debts against your home.