Wherever you stand on Brexit, one thing is certain about this unprecedented period in Britain’s history and that’s the climate of uncertainty that prevails until the process is complete.
For some, that degree of uncertainty is making them want to play safe with their financial decisions, including remortgaging their properties. Those who fear interest rates might suddenly shoot up (which is highly unlikely) are keen to lock themselves into the longest fixed-term mortgage possible to protect themselves from any market turbulence.
How often should I remortgage my home?
For those who have relatively low mortgage debt remaining – £100,000 or so – then it may indeed be the most sensible option to take a five-year fixed mortgage as the set up costs of doing it all again in a couple of years may outweigh any savings.
In general, however, we believe that flexibility is key with a mortgage – Brexit or no Brexit. Whether it’s a buy-to-let or residential mortgage, we would generally advise fixing for two years – especially if you have a relatively large mortgage. That allows you far greater freedom, without being tied in for a long period or having to face high early exit fees.
Can I get a better deal by remortgaging? What if I’m self-employed?
In some cases, your personal circumstances may have changed since you last applied for a mortgage, including one or both partners having become self-employed. This needn’t be the obstacle to getting a good deal that many perceive it to be, though.
Less experienced brokers may be unaware of how to find the best deals. They will still use their client’s income as the sole guide, which for those who operate as a limited company will be a modest sum they pay themselves to live on. But some lenders now take the business’ net profits into account instead and ask to see just the most recent year’s accounts.
We see a lot of contractors who need some lateral thinking with their mortgage deals. Fortunately, some lenders now will take the contractor’s day rate into account and multiply it to get an annual figure (based on 48 weeks). A day rate of £500 equates to an income of £120,000, which offers far greater scope for borrowing than it would if the decision was based purely on the salary and dividends the contractor pays themselves.
It’s all perfectly legal and reflective of how far more people work now, with increasing numbers of people choosing to be self-employed and have ‘portfolio’ careers that don’t tie them down to one employer or field of work.
Why use a broker for my remortgage? Can’t I just check online?
Three quarters of all mortgages now are dealt with by brokers (it used to be an even split between brokers and banks), and advice is key. So is an independent perspective of the whole market and the ability to find the best solution for the client.
One high-earning client of ours needed to increase his mortgage by £150,000 to replenish his business account after he had used the money in a divorce settlement. His application was initially declined by lenders, but we knew how to present his situation in the right way and we got him an offer within four weeks.
It’s easy to fall foul of the system – many clients find their broker falls at the first hurdle when it’s literally a case of the computer saying ‘no’ and the broker lacks the experience to work around it.
Can I remortgage to make home improvements?
Another growing area of demand for remortgaging is among people who are improving their properties. The ‘improve not move’ trend of recent years, as home-owners decide to extend and enhance their existing homes rather than spend high stamp duty sums on moving to a bigger property, means that more than 50 per cent of the people who remortgage now are either paying off debts for home improvements they have already carried out, or are looking to raise capital for a forthcoming home improvement project.