If you are faced with the option of remortgaging for the first time, this guide is for you. Remortgaging is simply changing your current mortgage deal for another one and is usually something people do to lower their monthly repayments.
Here’s everything you need to know about how your LTV (loan to value) can affect your remortgage.
Can I remortgage to get a better interest rate?
Remortgaging is a great way to get a better interest rate and lower your monthly mortgage payments. One of the better ways to do this is to try and reduce your loan-to-value (LTV).
What is an LTV?
The LTV is the size of your mortgage compared to the value of your property. Mortgage rates are based on LTV bands of 5% and the lower your band when you apply for a remortgage, the wider your choice of options.
Can I change LTV bands?
If you are close to dropping into the lower band, for example, if your LTV is at 62%, you may want to consider overpaying on your current mortgage plan until you drop into the lower band.
Even a very small increase in your monthly payments can result in big savings in the long run. However, check with your lender to see if they charge you for overpaying.
Can remortgaging give me more flexibility?
Not only can remortgaging save you money; it can also loosen restrictions on your loan agreement to allow for more financial freedom. This is useful if your circumstances have changed since you took out your initial mortgage.
For example, maybe you had a promotion and can now afford to pay larger sums of your mortgage back, or you want to switch to a remortgage deal that lets you take a payment holiday (a break from paying back your mortgage). This added flexibility can be a game changer in becoming mortgage-free, faster.
Can I remortgage to borrow more money?
Remortgaging can also allow you to increase your mortgage loan. This is beneficial if the value of your property increases, as this means that your equity does too. Your equity is the amount of the total property price that you’ve paid so far, as opposed to the remaining share that is your mortgage.
Can I remortgage to pay off my Help to Buy loan?
A Help to Buy loan can be paid off if you remortgage. After the five-year-interest-free period has passed, most people find it cheaper to remortgage and pay off the Help to Buy loan. It is important to ensure that you can pay your mortgage when the Help to Buy loan is added to it
Remortgaging can have many benefits, but be sure to do your research before taking the plunge. If you have any questions around remortgaging, don’t hesitate to contact one of our brokers for expert advice that’s completely free.