Many shop around to get the best deals, but what about when it comes to your mortgage?
A mortgage is a massive financial commitment, so it goes without saying that you may be sceptical to change something you’re so familiar with. However, did you know that remortgaging comes with many benefits? And the biggest benefit of all is how much money you could be saving.
In 2019, there was a 20% increase in remortgaging as people opted for additional borrowing as opposed to moving homes (FT Adviser, 2019). With current uncertainty around moving property, it’s even more important to look into remortgaging to improve your home, use additional funds towards other unsettled debts or simply lower your existing monthly payments.
It can be difficult to determine if you think remortgaging is the right option for you. To help, we have provided answers and information to some questions you may have around this topic. However, if at any time you feel you need more assistance – contact our experts today.
What exactly does it mean to remortgage?
Remortgaging gives you the ability to move your mortgage to a new lender, while staying in the same property.
When you take out your initial mortgage deal, it is usually for a fixed period of time (known as an initial rate or introductory period). As your fixed term goes on, you adjust your finances and lifestyle to suit your current mortgage deal and budget around it. However, there will come a time when this rate will come to an end, and when it does your current rate will switch to your lender’s standard variable rate. All lenders have a standard variable rate, and usually these are the most expensive option – and one a lot of us end up being on for a long time.
This is where remortgaging could be considered as an option for yourself and your family. There are many things to consider before you undergo the remortgage option, such as:
- Has your property value decreased or increased?
- Your credit score – it is always recommended to keep an eye on your credit score
- Have your financial circumstances changed?
- Do you want to borrow more money on your mortgage?
We have provided a list of reasons for and against remortgaging your property, which are available to view here.
Once you have reached the end of your introductory period, you are then able to review options and quite often secure a better rate. Your balance is likely to have reduced, your property may have increased in value, so when you remortgage you are able to obtain a lower loan-to-value (LTV).
When considering switching to a new lender, make sure you understand what options you also have with your existing lender. It’s important to compare what offers are available to you.
Benefits of remortgaging
Not only can remortgaging potentially save you a substantial sum each month, but there are also many other benefits;
Remortgaging for a lower interest rate: It’s always worth checking what is available on the market because it is likely there will be a lower rate available to you. Lower rates mean smaller monthly payments. We will be able to assist you in working out what rate you’d need to make remortgaging beneficial, taking into consideration any early repayment charges or exit fees.
Remortgaging for better flexibility: Your previous lender might not have included over-paying your mortgage in your original terms, or it may be that the over-payment amount is too small. You may have had a pay rise since you agreed to your original term, or you have inherited a sum of money and you are looking to stay in your existing property and pay your mortgage off quicker. If this is the case, a remortgage will allow you to potentially reduce your loan size.
Remortgaging for home improvements: Remortgaging for home improvement reasons involves releasing the equity, which will be the difference of the increased property value and the existing mortgage balance. Home improvements can add value to your property, which is why more people are opting to remortgage at a lower rate and borrow a sum of money, as opposed to taking out a personal loan or saving for long periods of time.
Remortgaging for debt consolidation: There are many reasons to remortgage your property and for some it may to be consolidate your existing debts. By consolidating your debts, it means you can use the equity of your home to pay off debts you may have incurred over time. By remortgaging, you could potentially get a lower interest rate than if you were to take out a personal loan or look to pay off debts using a credit card.
Ensure you watch out for any early repayment charges you could potentially face when remortgaging. If you are tied into an existing deal, there will usually be an early repayment charge of the outstanding loan with your current lender. Exit or admin fees may also apply.
How Choice Mortgages can help you
At Choice Mortgages, we have experienced experts to help with your remortgaging queries. Each client has individual reasons and needs for their request to remortgage, and we endeavour to achieve a satisfactory solution for each of you.
As local independent mortgage experts, we have an unbiased view of the whole mortgage market. We will compare your existing lenders options to all other lenders across the market so you get the best deal.
We have helped thousands of clients across the UK, and even in these uncertain times due to Covid-19 – we have options in place to help you. So you can rest assured knowing that you can get advice and help with remortgaging from the comfort and safety of your own home.
How does remortgaging work?