Is it time to think about remortgaging? | AAG Wealth Management

Is it time to think about remortgaging?

Posted: February 1, 2021

Is it time to think about remortgaging?

 

It’s wonderful to read headlines about vaccines and a return to something like normal; yet daily news of further restrictions and recession do little to calm the financial nerves. Little wonder, then, that many people are using this uncertain time to reassess their goals to in the light of unpredictable events, as well as reassessing their own objectives.

One way of doing this is securing a better-value loan on your home through remortgaging. Switching your mortgage deal, either with your existing lender or a different one, isn’t a new concept; but when it comes to achieving long-term financial goals, for some people it takes a back seat to, say, amending a personal pension or restructuring investments.

It’s easier than you might think

That, however, may be a mistake, according to Paul Johnson, Client Banking and Mortgage Manager at St. James’s Place, who believes that remortgaging should be at the forefront of financial planning. He says the historic perception of remortgaging – that it’s a troublesome, bureaucratic process involving the gathering of payslips and other paperwork, and seeking a solicitor’s approval – is largely outdated. Many lenders have made the process simpler, quicker and far less stressful.

Remortgaging is also an option with buy-to-let (BTL) investment properties. Some landlords increase the size of their portfolios by releasing funds from existing BTLs through remortgaging, to pay the typical 30 to 40% deposits required when purchasing an additional property.

But whether you’re an owner-occupier or a landlord, it’s important to have clear goals for remortgaging, and then to research and calculate as thoroughly as possible to ensure that you choose the optimum remortgaging product.

Identifying goals

So, why talk about goals? Surely remortgaging is simply about paying less per month on a mortgage? “Yes and no,” says Johnson. “Of course remortgaging should mean paying less, and if successful it’s likely to save hundreds of pounds a month. But if that’s frittered away, the full saving isn’t maximised. A goal of, say, using saved money to pay down the mortgage is a win-win – you pay less per month on the mortgage itself, while the loan term is shortened.”

There are many other possible goals – using saved money to invest, for example – so establishing objectives at the outset will help you to identify the right mortgage for you. That’s where research comes in. There are literally thousands of mortgage products in the marketplace, so where’s the best place to start?

A lower monthly payment will be the primary objective, but it’s vital to assess other factors. Is there an arrangement fee for switching to another lender? Does a longer-term mortgage mean you ultimately pay more? If you inherit and want to go mortgage-free, will there be a large early repayment fee?

“And remember, not all lenders cater for all clients, especially in our Covid times,” says Johnson. “The self-employed or those on furlough will have fewer remortgage choices – but they do exist, and an expert will find them and advise on them.”

Getting the right help

That access to expertise – from people who can authoritatively assess your financial position and look at the widest selection of options available – is more important than ever right now.

“Covid has fast-tracked change in people’s lives. Job security, which they previously felt they controlled, might now be out of their hands. And the monthly cash flow, which used to be so reliable, may be much less certain today,” says Melloney Underhill, Marketing Insights Manager at St. James’s Place.

Traditional reasons for remortgaging – because an existing mortgage deal is ending, or a home has increased in value substantially, or a borrower is concerned about future changes to interest rates – remain completely valid. But in the context of the pandemic, there are often more immediate and less predictable reasons why people may take this course of action, especially if short-term protections such as payment holidays and furlough arrangements are added into the mix.

“It’s a delicate and difficult time,” says Underhill. “Someone must be willing to say if an option is wrong and suggest a better solution. If a client has a six-month cash problem, they shouldn’t lock themselves into a 25-year product which makes them disadvantaged long-term just to achieve a quick remedy.”

With uncertainty in plentiful supply, it’s easy to steer that wrong course. “So the trick,” says Underhill, “is to have someone in your corner, identifying opportunities and pitfalls, and offering financial advice. It’s needed more now than ever before.”

The home on which the mortgage is secured may be repossessed if repayments are not kept up to date on the mortgage.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

Some buy-to-let mortgages are not regulated by the Financial Conduct Authority.


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