Covid-19 has had a massive impact on the mortgage marketplace, with some lenders withdrawing altogether and thousands of products being withdrawn, but the outlook is not as gloomy as you may imagine if you need to think about a remortgage.
If your current deal is about to end, ends later this year or if you want to
consider remortgaging to consolidate commitments and re-organise your finances what options are there and what should you do?
If your mortgage deal is ending soon
Firstly, if your current deal ends imminently, whilst there has been a reduction in the number of lenders and products, many of those withdrawn are for house purchase or higher risk lending.
Most lenders continue to offer product-transfer deals for existing customers, many still offer Remortgage deals for new customers and we can arrange these for you without any advice fees, so we can typically advise you on options from the whole of market and your current lender at the same time.
If your income has been impacted by the crisis this might affect your ability to change lender, but should not prevent you from transferring to a new deal with the current lender.
If your mortgage deal is ending within the next 6 months
For anyone whose existing deal comes to an end by late Autumn now is an ideal time to think about remortgaging.
Several lenders offer remortgage deals which are valid for 6 months so you can apply well in advance, taking advantage of the extremely low current rates and set everything up ready to switch over as soon as the current mortgage deal expires.
There are several reasons why doing this now could be wise. Firstly, although lenders have not passed on the full rate reductions made by the Bank of England into new fixed-rate-mortgage deals, there is a good chance that this never happens.
With losses being so great in every industry, it is difficult to imagine lenders being keen to cut into vital profit margins when rates are already at all-time lows.
Conversely, we could see a reduction in house prices or even lenders pulling out of the market entirely creating a situation where you were better off applying today than in several months.
No one has a crystal ball to be able to say for sure how the market will progress over the year but the likelihood of rates getting significantly better than today’s seems dim.
Consolidating credit commitments into your mortgage
This is the area where the remortgage market has already shrunk significantly. So if you want to trim down your outgoings and reduce your typical monthly commitments then it may be wise to act now rather than waiting.
Bear in mind though, that in many cases consolidating credit commitments into a mortgage does not represent the best value for money and may be more expensive than alternative options like balance-transfer deals or converting credit card debts into a personal loan for example.
It’s also important to note that you convert typically unsecured credit commitments into one secured against your home, meaning you stand to lose your most precious asset if you default, where previously there may have been no risk of this at all.
We can help you get a picture of whether a debt-consolidation remortgage is the correct solution in your circumstances.
Changing your mortgage term
You don’t necessarily have to wait to remortgage to alter your mortgage term, and therefore your monthly payments (for anyone on a repayment loan).
If this is something you want to look at you can speak to your lender about this and may be able to do this midway through an existing deal even if you have early repayment penalties.
Again though, this is something that can also be done as part of a remortgage or product transfer and if you want to reduce your outgoings in this way get in touch and we can discuss your options.
If you are in financial difficulty
If you are experiencing difficulty making payments, your first port of call should be your existing lender to discuss what options they have to prevent you from getting into arrears, including the government’s payment-holiday scheme.
If there is a serious risk of you defaulting on obligations like credit cards, loans or hire purchase and other non-secured credit commitments, then consolidating these into your mortgage is a potential solution but it increases the risk of losing your home, by converting unsecured commitments into a secured debt.
We can help you get an understanding of whether consolidating commitments is a solution that could be viable for you, but you should consider speaking to stepchange.org & the Citizens Advice Bureau about the implications of getting into arrears on either type of commitment and other options that may be available such as an IVA.