As planning laws ease, more homeowners are likely to consider making improvements to their homes rather than buying a new place. In the near future, homeowners will be able to add new extensions or extra space above their properties thanks to a fast-track approval process recently unveiled by the Government.
For people considering making home improvements, the current low mortgage rates are a great opportunity to access funding for their build projects. A remortgage can be a great way to fund home improvements, but it would be wise to get the ball rolling as soon as possible since the market is extremely busy right now. Many lenders will take longer to process applications than they usually would, and they may need to see additional supporting documentation before agreeing to approve your remortgage application.
Remortgage to cut costs
Even homeowners who have no plans to improve their property could make big savings on their mortgage if they are currently on their lender’s standard variable rate (SVR). It is estimated that as many as 800,000 homeowners are currently on SVRs, and the combined savings these people are missing out on could amount around £2 billion. It just takes a remortgage onto a better deal.
The SVR is the rate most mortgage deals automatically move onto when you reach the end of the deal period. Generally speaking, the SVRT is far higher than other mortgage rates, and there is usually no penalty for moving away from this rate to a new mortgage deal.
Comparison site Comparethemarket.com indicates that many homeowners who are currently sitting on an SVR could save up to £2,300 if they made the switch to a two-year fixed-rate mortgage deal. This estimate is based on a person with the average UK mortgage debt of £135,000 whose SVR is a pretty typical 4.09%. If they remortgaged to the average 1.42% two-year fixed-rate mortgage deal, their monthly payments would be reduced from £658 to just £465, saving them £2,316 a year.
The savings to be made will be highest for those with significant equity in their homes, since the best rates are usually offered to borrowers seeking a mortgage on 60% or less of the total property value.
Learn more: Remortgage Fees
Don’t wait for your current deal to finish
It isn’t necessary to wait for your existing mortgage deal to end – you can start the remortgage ball rolling sooner. Most lenders will permit you to secure your new mortgage deal 3-6 months before you reach the end of your current deal. The primary benefit of doing this is that you can have your new mortgage deal begin as soon as your current one finishes. This means you will not spend any time on that dreaded SVR and no money will be wasted on a higher rate than necessary.
Forward planning in this way is a good idea, but there is a catch. The longer there is before the time you want your new deal to come into effect, the more limited your choice of lenders will be. This means that the best mortgage deals may not be accessible if you still have several months before you reach the end of your current deal.
One thing to remember is that your current lender may be able to offer you a better deal than their competitors. In order to retain existing customers, many lenders offer highly competitive deals for switching to a new mortgage. Once you know what they can offer you, take a look at remortgage deals from other lenders to see how they compare. One advantage of staying with the same lender is that it can make the whole process less complex and stressful.