Wondering whether now’s the right time to remortgage your home?
Some of the key benefits of remortgaging include saving money, increasing your borrowing capacity, and providing you with greater flexibility.
The benefits of remortgaging
Simply carry on reading to learn more about some of the main remortgage benefits.
Reduce monthly repayments
Remortgaging onto a lower interest rate deal can significantly reduce your monthly mortgage repayments.
This means you’ll have more disposable income.
Alternatively, you can choose to reduce your mortgage term, leading to higher monthly payments but saving you money in the long run by reducing overall interest costs and helping you become mortgage-free sooner.
Be aware though that a lower interest rate isn’t guaranteed, and available rates vary according to what’s happening in the market place at any given moment.
Gain better financial control
If you’re currently on a mortgage without a fixed interest rate, and you feel uncertain about your monthly expenses, switching to a fixed-rate product can provide peace of mind.
With a fixed-rate product (for example, two years), you’ll know exactly how much your monthly mortgage payment will be throughout the deal’s duration, eliminating any unpredictability that comes with variable rates.
Consolidate debt
Remortgaging can be an effective strategy for consolidating personal debts by rolling all (or at least some) of your outstanding debts into your mortgage, simplifying your different financial obligations.
Keep in mind though that you’ll need to disclose all debts to your chosen lender, and they may require you to sign a contract stating that you’ll use the additional borrowing to pay off other debts.
Pay off your mortgage quicker
There are a couple of ways to accelerate your mortgage payoff through remortgaging:
- You can reduce the mortgage term, increasing your monthly payments but decreasing the overall interest paid over time
- You can choose a deal that allows you to make overpayments without incurring charges. This is ideal if you’ve received a windfall, or a pay rise, and want to use the extra funds to pay down your mortgage faster
Borrow more for home improvements
Suppose your home’s value has increased, and you have sufficient equity.
In that case, remortgaging can provide the funds needed for home improvements, such as an extension or a renovation.
Understanding a remortgage
Essentially, remortgaging involves switching from one mortgage product to another.
That means changing lenders, or sticking with your current one.
If you choose to stay with the same lender, you might hear the term “product transfer”; this simply means you’ll switch to a new mortgage deal provided by the same lender.
To learn more about how a remortgage works, why not read our comprehensive guide?
Why should you remortgage?
So, why do you remortgage a property?
There are many reasons why someone might be looking at remortgaging their home, but we identify the main ones below:
If:
Your current deal is coming to an end
The most common reason for remortgaging is that your current fixed-rate mortgage is coming to an end.
If you choose not to remortgage, you will automatically revert to your existing lender’s Standard Variable Rate (SVR).
However, many homeowners will choose to explore other products available on the market, or at least deals offered by their current lender, because the interest rates on SVR mortgages are higher than the fixed-rate alternatives.
You want to release equity from the property
Remortgaging can also be used to release equity (the portion of your home’s value that you own outright) from the property that you can then put towards home improvements, paying off debts, or gifting to a family member.
Given you’ll be reducing your equity and potentially increasing your debt, we always recommend speaking to an experienced mortgage advisor to ensure you understand the benefits and potential drawbacks of this option.
You’re looking for different terms
You can also explore different types of mortgage products, including fixed rate, tracker, discount and SVR mortgages, for example.
Each type of mortgage product has features that will impact how suitable, or beneficial, it is for your personal circumstances.
A professional mortgage advisor can help you understand the types of mortgage products available to you.
You’ve had a change of personal circumstances
During the process of applying for your mortgage, you will have been asked to provide the lender with documents, including your job position, any debts, and bank statements.
Using this information, they will have assessed your affordability and offered you a mortgage they believe you can afford.
However, if since then you’ve had a significant change to your income, or paid off a substantial amount of debt, your affordability may have increased – meaning you could be eligible for more deals on the market.
Plus, if you’ve recently gotten married, entered into a civil partnership, or moved in with a partner and are considering adding them to your mortgage, this can be arranged with a transfer of equity and remortgage deal.
You can also use transfer of equity and remortgaging to remove an individual from your existing mortgage. This may be a suitable option for those going through divorce or separation.
Things to consider before remortgaging
Like everything, there are pros and cons of remortgaging.
Whether you’re looking to reduce monthly repayments, gain financial stability, consolidate debts, pay off your mortgage sooner, or fund home improvements, a well-planned remortgage can unlock these advantages for you.
However, from the cost of remortgaging to the knock-on effect that more competitive repayment plans can have on your wallet in the long term, it’s important to understand the potential drawbacks.
Additional remortgaging fees
To remortgage, you may need to pay a range of fees, including arrangement, legal, and valuation fees.
Arrangement fees cover the cost of the lender setting up the product for you and are applicable for product transfers and remortgaging by switching lenders.
Legal fees, on the other hand, are often only required for switching lenders to cover the cost of conveyancing.
These fees are sometimes included as part of the remortgage arrangement by the lender, but in other cases you may need to pay for these legal services yourself.
As part of the remortgaging process, lenders will often require a valuation of the property which comes at a price, known as valuation fees.
However, these costs are generally only applicable if you want to switch lenders or release a property’s equity.
Early Repayment Charges (ERCs) may be applicable
On top of the fees mentioned above, you may also be required to pay an Early Repayment Charge (ERC).
These charges are typical if you pay back your mortgage early, or choose to remortgage with a new lender before the end of your existing deal.
The fees vary depending on your remaining mortgage balance, but most are between 1-5% of your balance.
We’d always recommend finding out exactly how much you’d be required to pay before you decide to remortgage early with a new lender.
Potentially longer loan terms
To obtain a mortgage with a reduced interest rate (to lower your monthly repayments), you may also need to increase the loan period.
In the long-term, this means you’ll pay more interest, so it may not always be the most suitable financial decision for you.
Higher mortgage repayments
Eager to avoid a longer loan term?
Regardless of whether you want to shorten your loan term, release equity, or achieve more preferable terms, it’s likely that you’ll be presented with a deal that has higher monthly mortgage repayments.
Fortunately, an experienced mortgage advisor can help you to explore your options and understand both the pros and cons of remortgaging.
Summary of the drawbacks of remortgaging
To conclude, the main drawbacks of remortgaging are often the unexpected costs – especially as one of the main motivations for remortgaging is to save money!
It’s vital that anyone considering remortgaging does their research, allowing them to carefully weigh the potential savings versus the costs of switching.
For help securing a new mortgage deal that meets your individual needs, a mortgage broker should be your first port-of-call.
After learning more about your reasons for wanting to remortgage, they’ll be able to assess your needs and remortgaging options before then pointing you in the right direction.
Should you remortgage?
After exploring the pros and cons of remortgaging, you should now have a clearer idea of whether remortgaging might be the right move for you.
However, before you make any big decisions, why not speak to one of our experienced mortgage advisors?
Contact UKMC today!
Ready to remortgage your property?
Whether you’re looking to transfer equity, remortgage or explore a product transfer opportunity, there’s many benefits of remortgaging that are worth exploring.
To find out more about how our friendly team of expert mortgage advisors can help you to achieve your remortgaging goals, please feel free to book your free appointment online today or give us a call on 01925 573328.
Or email us at hello@ukmc.co.uk and you can always get in touch using our convenient online contact form.
Prefer a more personal approach? For a face-to-face chat, simply pay a visit to our Warrington-based office which is open from 9:30 am–5:30 pm Monday-Thursday, and 9:30 am–3pm on Fridays.
However you choose to get in touch with our team, we look forward to hearing from you!
Disclaimer
UK Mortgage Centre Limited is an Appointed Representative of Refresh Mortgage Network Limited.
Refresh Mortgage Network Limited is authorised and regulated by the Financial Conduct Authority. We are entered on the Financial Services Register under firm number 1019794.
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments. The Financial Conduct Authority does not regulate some forms of buy-to-let mortgages.
The Financial Conduct Authority does not regulate will writing and taxation and trust advice.
You may be charged a fee for your advice. A typical fee is £495, which would be payable when you receive your mortgage offer. Your dedicated advisor will discuss this further on your free initial phone call.
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