Is today the big day? IS IT?
The issue of when to remortgage has always been a bone of contention, but especially during turmoil, when our rectums are being stretched out by crumbling economies, and causing havoc on our personal finances.
Like, right now.
IF INTEREST RATES CONTINUE TO FUCKING RISE I WILL LOSE EVERYTHING; MY HOUSE, MY WIFE AND MY SECRET PET BOYFRIEND!
Should I remortgage and lock in a new fixed rate before it’s too late?
When the ship starts to sink, reassessing the ol’ mortgage policy is a common place of refuge for many landlords. “Maybe I can tinker with this to help curb my imminent financial ruin?”
I get it.
However, I’m not entirely sure why a sledgehammer of a trigger is required to inspire some landlords (and homeowners) to remortgage, because EVERY DAY – regardless of macro and micro economic factors – is potentially a good opportunity to jump into a better deal and save substantial nuggets, often into the tens of thousands. Yes, even when pinned down by a fixed-term.
Rummaging through the mortgage market for an opportunity should be routine, not a knee-jerk reaction reserved only for when fixed terms are shortly expiring or when shit is splattering off the fan.
My opening thoughts on remortgaging
It’s usually worth doing (and remortgaging should be done more often)!
I’ve saved too much money by remortgaging in the past, and that’s precisely why I often resemble a rampant, toothless meth addict looking for my next hit in the form of a better mortgage deal.
I often wonder why landlords/homeowners don’t remortgage more often. I’ve come to the conclusion that it’s probably because:
- A ludicrous amount of people are painfully financially illiterate, including landlords and homeowners. I mean, like, completely and blissfully away with the fairies. They operate on a profoundly dysfunctional level when it comes to personal finance.
For example, they’ll continue paying 17.9% interest on their outstanding credit card balance instead of doing a balance transfer onto a card offering a 0% rate, and they’ll leave their life-savings decaying away in a 0.10% current account, and yes, they’ll stick to the same mortgage product even after the fixed-term has expired, despite significantly better deals being available.
Just weird shit that would make even toddlers – that know enough to deposit loose change into their piggy bank – feel physically ill.
I’m not saying these creatures are gormless Neanderthals, I’m just saying they don’t have a scooby when it comes to managing their finances – they’re not wired for it. No doubt, they excel in other areas that would give me a brain aneurysm.
You don’t know what you don’t know, is the point.
- Many people either don’t know it’s possible to remortgage during the fixed rate period, or do know and only consider it when it’s due to expire, when actually, it is possible and waiting until the end is not always the smartest play.
There have been times when I’ve willingly been clobbered with early repayment charges because it made financial sense to prematurely exit fixed-terms (that isn’t necessarily the norm, but it’s certainly not as unlikely as most would expect). I’ll share an example shortly.
- I’m convinced one of the main stumbling blocks is an over exaggeration of how complicated the process is, and that creates a natural deterrent. It doesn’t help, of course, that we as a nation are lazy beyond contempt. Case in point, I literally ordered dental floss off Amazon this morning. Nothing else was in my basket, just a lonely £2 reel of mint flavoured floss. I’m part of the problem. Knowing Amazon, it will arrive in a 20 square metre shipping container, filled to the brim with bubble wrap.
Don’t get me wrong, switching mortgages can be a meandering pain in the tits. But, the shakedown is ultimately worth it, and the process is usually not as grotesque as our wild imagination portrays it to be.
Can’t time the market
Remortgaging today (whether that be moments after this goes to print or 10 years down the line) may or may not be the most optimal moment, so timing can also play a vital role.
However, experience has taught me that remortgaging is like investing in the stock market – it’s difficult to time the tops and bottoms, so the sweet-spot is usually somewhere in the middle.
Yes, getting the best rate possible is always the ideal outcome, but waiting on the side-lines with a boner for ideal scenarios can often lead to missed opportunities.
As long as I can get a better rate, or rather, a product that seems sensible and provides a manageable monthly payment (which may include protecting myself from further interest rate hikes, even if that means my new monthly payments increase), I’m good.
One big money-saver
My final and perhaps most poignant thought is that remortgaging is one of the most effective methods of saving thousands of pounds on expenses. Or, in other words, not remortgaging is often one of the most effective ways of frivolous overspending.
I’ve grabbed an example of how much money I saved when remortgaging from a dusty old post…
|Lender||Virgin (formerly Northern Rock)||Natwest|
|Loan Period||16 years, 5 months||16 years|
|Interest Rate||4.79% (SVR)||3.79% (5 Year Fixed)|
|Loan Period||16 years, 5 months||16 years|
|Repayment Type||Capital + Interest||Capital + Interest|
(went through letting agent’s in-house adviser)
(went directly through Natwest, didn’t use any third party)
(unfortunately I don’t remember)
(Natwest took care of all the legal fees)
|Total I’ll repay over full term||£130,500||*£121,500|
(if you want to find out how much you can save by switching mortgages, MSE have some awesome mortgage calculators that can assist! But you’ll need to find a suitable new mortgage product first…)
By remortgaging I ended up saving 10k over the duration of the loan (*based on a rate of 3.79%) and paying £50 less each month. It felt good.
I appreciate the interest rates I’m discussing may not be attractive today (or maybe they are, depending on when you’re reading this pile), but you get my point, innit?
Here’s a super quick and important note…
Hopefully I don’t need to throttle you while reminding you that I am absolutely unqualified – to the highest degree – to provide financial or legal advice. This blog post is for chuckles and entertainment purposes only.
Think, “education for clowns by the emperor of clowns”
You should consult with a trained professional before making any financial decisions. Don’t rely on my slop, it will likely get you imprisoned, killed, or worse, both!
My preferred mortgage broker services (and why I’ve gone online)
Just like how I switched from high-street letting agents to online letting agents several years ago, and not looked back ever since other than to spit fire, I’ve also made a similar switch to online mortgage brokers. I find them easier, more convenient and less irritable than traditional brokers and lenders. There’s no need for face-to-face meetings and long phone calls. Lovely.
Habito are currently my first port-of-call when it comes to mortgages – and have been for a few years. I think they might be the largest online mortgage broker in the UK.
The reason Habito is my go-to:
- 100% free service for borrowers (they get paid a commission directly by the lenders).
- They work with a gigantic pool of lenders, which means they can pluck out competitive products currently available across the market.
- Website is super easy to use (which makes a big difference).
- I’ve had good experience with their customer support.
- Highly rated with plenty of positive reviews on TrustPIlot (7000+).
Online mortgage brokers are not to be confused with comparison websites like moneysupermarket.com – who palm you off to their affiliated lenders. Habito are actual brokers and assign each applicant with a case manager, to assist throughout the process.
Trussle is another extremely popular and reputable online broker, which you may have heard of. But I’ve never used them before, so can’t really comment on their service.
My experiences with remortgaging
Not really sure how useful this section will be for you, but maybe it will reach the bonces of those with limited experience with juggling mortgages, and consequently provide some food for thought. I’m going to cover a mixed bag of real scenarios, which prompted me to either shoo-away the opportunity to remortgage, or shove it down my pants quicker than a shoplifter smuggling Duracell batteries.
If all goes to plan, my experiences will highlight:
- Why it’s not always obvious when to hold or switch mortgages.
- Macroeconomic factors drive the market in one direction or another, and while we can’t predict the future, we can take educated guesses and hedge our bets.
1) The time I refused to remortgage even though I could fix into a lower rate
At the peak of the previous cycle in 2007, the UK interest rate hit a peak of 5.75%.
The property market was booming and euphoria was squirting out of the nation’s eyeballs. Everyone was glued to their TV watching property show after property show, being inspired as we all witnessed mesmerising magic – the dumbest and most socially inept in society were becoming successful property investors in front of our very eyes.
“If they can do it, I can do it better”
So we all did. Try, that is.
Alas, as my ex once wisely said, “Every time I’m having a good time with you, you either need to shit or fart.” Evidently, financial markets behave exactly like my bowel movement.
The inevitable happened…
Financial markets around the globe didn’t just decline, they jumped off a cliff and face-planted into the earth’s core overnight. In hindsight, it’s kind of hilarious how quickly the wheels fell off this thing.
By sunrise, thousands of over-leveraged investors and homeowners defaulted on loans, and many were unable to refinance because their assets became significantly less valuable than their outstanding loan balance. I’m pretty sure I had more equity in my Fiat Punto than my entire portfolio at some stage.
During the commotion, I had expired out of a 2 year fixed-term mortgage and had subsequently been man-handled onto my lender’s hefty Standard Variable Rate (I don’t remember what the exact rate was, but I distinctly remember it was severely butt ugly).
With all the uncertainty and destruction, arguably it would have been sensible to lock into a 2-5 yr fixed rate at an available lower rate, least of all to secure a predictable cash flow.
Many did exactly that.
But I didn’t.
It seemed clear to me that the only way the Bank of England could patch back together the obliterated economy was to lower interest rates (so loans become cheaper). Obviously I didn’t know for sure though, but I took an educated guess and hedged my bets by remaining on the horrendous SVR.
Fortunately it paid off, because the UK interest rate quickly declined to 0.5% by 2009, and it went as low as 0.25%, and remained below 1% until earlier this year.
Since most SVR’s stalk the UK interest rate, my mortgage rate was below 1% for over a decade, and still to this day I’m riding that sweet wave – my SVR is still only 2.14% for that same mortgage (which is relatively decent).
Stone me, Rodney, do you even realise how much bloody money I saved by vaguely understanding macroeconomics?
ANSWER ME, DO YOU?
No, neither do I, because I can’t do the maths to save my life. But it’s a lot.
2) The times I couldn’t remortgage quickly enough
I want to give two quick examples here…
When interest rates are on a upwards protectory…
If you take into account the reason for why I didn’t remortgage in my previous example, logic dictates that if I anticipate a rise in rates over the coming years, then it makes sense to lock into a fixed rate.
That should be obvious, which is why I recently remortgaged into a 5yr fixed rate. Right now, I personally don’t see interest rates getting lower in the foreseeable future, but I’m not entirely sure if they’ll get much higher either. Mind you, there’s no telling what the situation will be like by the time you read this blog post, so bearing in mind the principle behind my decision is what’s important.
In any case, this is when taking educated guesses and making decisions based on debt/payments we can manage comes into play, rather than only focusing on trying to catch the lows. Regardless of what way the economy swings, I know I can comfortably make the monthly fixed rate I’ve locked myself into.
When markets are stable…
In 2019 I was on the verge of being man-handled again, but this time I decided to side-step my lender’s SVR and voluntarily wedge my foot into a spanking new 5yr bear trap. Reason being, rates had been stable for some time and there were no obvious signs of incoming disruptions (in one direction or another), so to me, it made sense to secure a lower rate and a predictable cash flow.
When the markets are stable, it generally feels like a good time to remortgage into a fixed term, especially if a better rate is available.
3) The time I paid my lender’s early repayment penalty in order to remortgage!
As briefly mentioned, I believe most borrowers only consider remortgaging when the fixed-term is due to expire. Whilst that’s perfectly logical and usually the optimal time to strike, it’s certainly not a hill I’m willing to die on, because absorbing penalties to exit early can be a legit money-maker in the long run.
I took one [a penalty] up the bum some time last year, or maybe it was the year prior. Anyways, it doesn’t matter. My memory is failing me like my clapped out bladder.
I believe I had 14 months left on a 5 year fixed rate, so that meant I was subject to a penalty if I wanted out.
Most early repayment penalties work on a sliding scale, which means the penalty reduces as it gets closer to the expiration date.
Since I was towards the latter stages of my fixed term, I was subject to a 0.75% penalty of the remaining debt if I wanted to remortgage.
I had worked out (by that, I mean my accountant had worked out) that it would actually be financially beneficial for me to take the penalty on the chin and jump into the new product which offered a more favourable rate.
So I did exactly that.
So what does this all mean?
First and foremost, I don’t want you to lose your spouse or your pet. You deserve financial stability so you can keep them all.
It doesn’t really matter what is happening around us, remortgaging should always be on the table, and options should be regularly explored. Moreover, putting ourselves in a position where we can manage and forecast payments is often better than waiting around for the best rate possible.
Right, that was a mouthful. I officially have wankers cramp.
Blimey, if you read it until the bitter end, you’re as disgusting as I am, and I appreciate that.
I’m going to love you and leave you xoxo
Disclaimer: I’m just a landlord blogger; I’m 100% not qualified to give legal or financial advice. I’m a doofus. Any information I share is my unqualified opinion, and should never be construed as professional legal or financial advice. You should definitely get advice from a qualified professional for any legal or financial matters. For more information, please read my full disclaimer.