Remortgaging is the process of taking out a new mortgage in order to pay off an existing one. The main reason homeowners remortgage is to switch to a better deal and save money in the process or release capital tied up in their current mortgage – this is known as a top-up or equity release. In this article, we will look at precisely what the remortgage process involves and five great reasons to remortgage your property in Ireland right now.
Why should I be considering a remortgage?
If you took out your mortgage before 2011-2012, the chances are your fixed introductory deal has long come to an end, and you could save thousands by switching to a new one. Market turmoil over the last year has made longer-term mortgage and remortgage deals more attractive than the shorter term alternatives that previously enjoyed the best rates. Remortgaging can also help protect households from the current economic uncertainty as any homeowner on a lender’s standard variable rate is likely to see their mortgage rates going up and down along with their repayments. A fixed deal can give households better financial stability. Here are some of the top reasons to remortgage in Ireland right now.
1. Your current deal is coming to an end
If you’ve been tied into a mortgage deal for a fixed period of 2-5 years or more, and that deal is coming to an end or has already ended, you will most likely be moved to the lender’s SVR (standard variable rate). SVRs are generally higher than any fixed mortgage deal you’ve previously held and higher than some of today’s best mortgage deals.
It is recommended that a homeowner should start shopping around for their next mortgage deal 3-6 months ahead of their current agreement ending – this remains true even now as interest rates are rising.
2. The value of your home has increased
House prices have boomed in the last two years, with many regions experiencing significant increases in property value. If your home has enjoyed a rapid increase in value since you took out your mortgage, you could find yourself in a lower loan-to-value (LTV) price band. This means you could now be eligible for a lower mortgage rate. If you are unsure if this applies to you, it’s worth researching, as the savings could be significant.
3. You want to raise additional capital
If you are looking to borrow more money against your mortgage for an investment property or another purpose, it’s possible your current lender has said no or that the terms offered are not favourable. In this case, remortgaging might be the best option to raise the additional capital and save some money in the process. The new lender will expect to see proof of how the additional funds will be spent, and in the case of investment property, they will need to be confident that you can also repay the mortgage on the second property.
4. You want to overpay, but your current lender won’t let you
Whether you’ve earned a significant bonus, inherited some money, or saved enough to pay off a chunk of your mortgage early, you can save a considerable amount by remortgaging if overpaying is against the terms of your current mortgage.
A remortgage means you can reduce your loan size and benefit from the best rates due to having a lower LTV ratio. If you are considering doing this, check your current mortgage deal for any early exit fees and compare this to the saving you would make by remortgaging.
5. Mortgage rates are still reasonably competitive
The European Central Bank base rate has risen in recent months. In September, they rose from 1.75 to 2.25%, and further increases are to be expected. For homeowners, this means that if you are considering remortgaging and see a good deal, it’s best not to think about it too long as the rates are only going to rise further. So, it’s best to get a deal locked in quickly when you find the right one.
Additionally, longer-term mortgage deals are now becoming the more competitive products in today’s economy, giving homeowners more security compared to a one or two-year fixed deal. Previously short-term mortgage deals attracted the most competitive rates. So consider locking in for five or more years for peace of mind against further price increases.
Who shouldn’t remortgage?
Even though remortgaging has many advantages, there are some small groups of people that are less likely to benefit financially from remortgaging. Therefore, if any of the following applies to your circumstances, you should think carefully before remortgaging or wait until a better time:
- Your early repayment fees are significant. If you would end up paying out more by ending your current deal early, you might be better off waiting for the deal to end. In some cases, early exit fees can cost thousands.
- You only have small mortgage debt. For example, if you have a mortgage of 50,000 euros or less, you are less likely to save if switching fees are high. Additionally, some lenders won’t even consider offering a remortgage if the total outstanding mortgage is 25,000 euros or less.
- You are already enjoying a reasonable rate. If you are already tied into a good mortgage deal, there could be little to gain by switching.
- Your LTV is higher than 90%. In this case, you will find it challenging to find a competitive rate, and it may be better to stay where you are.
For everything you need to know about remortgaging in Ireland, don’t forget to check out our definitive guide to remortgaging, which looks at the whole process in more detail.
For the majority of homeowners, remortgaging isn’t an activity that should be overlooked. The savings could be considerable for anyone whose mortgage deal has expired or is about to expire. The savings could be significant. So, whether you are looking to remortgage in order to raise capital for an investment property, or switch to a better deal that saves you money, remortgaging could be the right answer.