More and more people are opting to remortgage. Remortgaging is when current mortgage holders switch their mortgage deal, or mortgage lender, with the expectation of benefiting financially.
Reasons to Remortgage
Whether you are switching your deal for a better rate, more favorable conditions, better service, or increasing the amount of your home loan, there are many competitive remortgage lenders on the market. Banks, building societies, specialist lenders, and mortgage brokers can accommodate all of your remortgage needs.
Depending on circumstances and needs, there are a wide variety of reasons why people choose to remortgage their home:
- Reduce your monthly mortgage repayments - Remortgaging can help you save money by significantly cutting your monthly repayments. Remortgages can consolidate debts into one loan that is easier and cheaper to manage. However, in order to take advantage, you must have some equity in your home.
- Release the equity that has built up in your home – Remortgaging provides retirement help using lifetime, reversion or equity release plans.
- To purchase a second home, holiday lodging, or buy-to-let property. Remortgages offer a cost-effective means of freeing up cash.
- Better Interest Rates - Consolidating all your debts into one loan may provide better interest rates and decrease monthly spending.
- To reorganize your finances if you are involved in a divorce.
- If you have credit card debt and/or personal loans, it is possible to consolidate all your debts into your mortgage using a remortgage. This can be to your advantage because the interest rate charged on credit cards and personal loans will almost always be much higher than the interest rates charged on a mortgage.
- Poor Credit - If you have been refused finance, have defaults, CCJs, arrears, IVAs, bankruptcy, repossessions and missed payments, this is often not a problem.
Cons
- Early Repayment Charges - If your current mortgage has a capped, discounted, or fixed rate, or if you received a large cash back when you took out your current mortgage, there is a good possibility an early redemption charge (ERC) will be applied. Make sure the ERC period is over before you switch your home loan.
- Other Fees – Remortgaging takes a bit of time and money. You may have to pay for valuation and legal fees, as well as administration costs and other arrangement fees.
Considerations
Lender competition means that it is now faster, easier, and cheaper to remortgage your current loan. Remortgaging has the potential to be the most cost-effective solution to consolidate your debts. However, make sure your new lender’s interest rate will continue in the future. Look at the lender's standard variable rate. It should provide an idea of its current competitiveness. A low rate should mean that it is looking after its existing borrowers’ interests as well as its new customers. A financial adviser will help you decide if remortgaging is economically worthwhile.
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