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Remortgaging - Without a plan there’s a cost

3 min
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Christina Moss, Specialist Financial Adviser for Wesleyan Financial Services, explains what happens when you don’t get a plan in place early on in the remortgaging process…

The mortgage landscape is particularly difficult and concerning for many UK residents due to the relentless increase in interest rates over the past fourteen months.

It was predicted by analysts that inflation rates (the driving force behind interest rate hikes) would begin to fall by the halfway point of 2023, bringing hope that interest rates would follow suit. Unfortunately, that hasn’t been the case thus far. This means that interest rates will continue to pose a significant challenge for those looking to remortgage their properties in the coming months at the very least.

For dentists, this is in addition to career-related mortgage challenges, such as proving earnings when self-employed, having complex income streams and, potentially for those who are early on in their careers, being on short-term NHS contracts.

The cost of delay

When work and life beckon, it’s easy for elements of financial planning to fall by the wayside. That being said, it’s worth being aware of the impact of letting your mortgage deal run on to a standard variable rate (SVR).

An SVR is the interest rate that will be charged once an initial deal period on a fixed or tracker rate mortgage comes to an end and, more often than not, it will result in a much higher interest rate. You can expect to pay significantly more per month on your mortgage payments if this is the situation you find yourself in.

As an example, let’s take a fairly average married couple who are dentists with an upcoming expiry date on their fixed-rate mortgage.

The couple borrowed £350,000 over 35 years on a two-year fixed deal at 2.45%, which comes to £1,242 per month. The couple decides not to take action and instead waits to see how interest rates fair in the coming months, moving on to the SVR at the end of their mortgage term.

Let’s say the average SVR in the UK is 8.25%* (which is the case while writing this article). In this scenario, the couple would be paying £2,550 per month – an eyewatering additional £1,308 in interest payments.

Stick or twist?

Whether or not you should remortgage now or wait will depend on your personal circumstances and attitude to risk.

As with all financial decisions, you need all the facts to make an informed decision, which is why it’s important to point out that fixed-rate deals are also very high with the average two-year fixed-rate mortgage at 6.44%*.

Fixed-rate deals also often come with an early repayment charge, payable if you choose to switch in favour of a better deal elsewhere before your existing deal ends.

One of the benefits of variable-rate or some tracker mortgages is that you should be able to move quickly if the right deal became available without the redemption penalty. This is definitely a risk-based decision though as there are no guarantees if and when interest rates will start to come down again.

There are many more mortgage terms and offers available which can be overwhelming when it comes to making a decision. An example is that dentists are one of a select group of professionals that can benefit from professional mortgages.

As your job is associated with higher long-term earnings, you can often enjoy better interest rates, lower deposits and more generous mortgage offers.

Whether you’re eligible or not will depend on the lender, as criteria can depend on your qualifications, age, employment type and registration with industry bodies.

Seek help from specialists

Tapping into the advice of a financial adviser who specialises in dentistry can enable you to understand both career-related and economic challenges when it comes to remortgaging your property – helping to give you the best chance for a successful application.

Book a no obligation financial review to speak to a Specialist Financial Adviser from Wesleyan Financial Services. 

Remember your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments. Wesleyan Financial Services is a broker not a lender.

* Figures quoted were correct at the time of production and are subject to change.

About the author
Christina Moss profile
Christina Moss

Specialist Financial Adviser at Wesleyan Financial Services

Christina provides specialist personal and corporate financial advice to clients and companies in the dental sector in the South West. She's worked in financial planning for over thirty years and has been with Wesleyan since 2008. As well as providing advice on areas such as the NHS Pension Scheme, mortgages, savings and estate planning, she can also provide guidance at key points in a dentist's career and help with planning for retirement and exit strategies.

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