We're looking to buy our first house, we've put an offer in so just getting a mortgage promise now. We've just had a man round who sorts mortgages out, recommended by a friend but there's something he said that I'm not too sure about. He said he'd get us x mortgage which has a fixed rate for 2 years, after the 2 years he would remortgage us to find us a better deal.
Does this make sense? I've only ever heard of people remortgaging as a bad thing.
You can move to a different deal without doing a full remortgage - i.e. without doing all the proof of income and outgoings business - after the the term of the fix is up. Sensible in the current climate. We were able to get a much better deal by changing to another fixed term product. Because our house has gone up in value on the mortgage company's books our loan to value is lower so we got a better low interest rate than we had thought we'd get.
Our monthly repayments are less, but because what we were paying before was affordable we can over pay too if we choose to.
Remortgaging is completely normal. As soon as the current deal is over (in this case 2 years) you shop around for a new deal. You will need to go through proof of income etc again, and may need to pay a product fee again. Valuation fees and legal fees are often free for remortgaging.
In the current climate, I'd fix for 5 years. Interest rates are at an all time low, but will rise.
You're thinking of 'remortgaging' in the terms of refinancing - people taking out more equity from their house in order to pay for a holiday or because they've racked up too much credit card debt, etc - which yes can be a bad thing.
But remortgaging in terms of switching to a new better deal once your current fixed term is up - that can be a good thing. It's highly unlikely you'll want to stay with the same mortgage company for the whole term of your mortgage. Unlike in the US, where people can get a fixed deal for the length of their mortgage, in the UK we don't have length-of-mortgage fixed or tracker rate deals - when you sign up for your mortgage, you will only know your rate for 2 years, 5 years, or at most 10 years, even though your mortgage may be for 30 years. After the fixed rate period ends, your mortgage interest rate changes to the lenders SVR - or 'Standard Variable Rate' - which as the name suggests is variable: it may be a lot higher than your fixed rate was, and the lender can change (i.e. increase) it at any time, without consulting you. So then you would look to 'remortgage' to a new, better deal with another lender.
It's a bit like switching to Vodafone after your 24-month contract with EE expires because they're offering a cheaper deal on the new iPhone ... only, sadly, much more expensive.
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