People remortgage for a variety of reasons. Maybe your current mortgage deal is coming to an end and you need a new one. Or maybe you want to borrow money against your property.
There are numerous reasons why people may choose to remortgage, and some of them could well save you money. Here we take a look at why you may want to remortgage, and the financial benefits that remortgaging can bring.
Why should I remortgage?
In the past, people often remortgaged to save themselves money. If there was a better mortgage rate available on the market than what you were currently paying, it would make sense to switch to that lower rate and save yourself money on your repayments each month (or use the difference to overpay your mortgage).
However, with interest rates currently on the rise, most people will be clinging on to their current deals at older rates, which are better than anything on offer right now.
Instead, in the current climate, one of the reasons people are remortgaging right now is to protect themselves against even steeper interest rate rises in the near future. Many homeowners are facing the tough decision of whether to remortgage and fix at today’s rate in case it gets worse in the coming months.
However, there are a number of other reasons why you might choose to remortgage…
Your current deal is about to end
Most mortgage deals only last a short time- usually 2 to 5 years. When your mortgage term comes to an end your lender will put you on its standard variable rate mortgage (SVR), which is likely to be significantly higher than your old interest rate, and your monthly repayments would increase in line with this.
To avoid this happening, most homeowners start to shop around for a new mortgage deal before their current term ends. Speaking to a mortgage broker during this period can be really helpful: they can advise on the best mortgage rates available on the market and help you get the best deal for when your current mortgage ends.
Your home's value has increased significantly
The property market has been booming over the last few years, which means that property prices have increased significantly and a lot of homeowners now live in a property that is worth far more than what they paid for it when they bought it.
If the value of your property has risen rapidly since you took out your mortgage, you may find you're now in a lower loan-to-value band, and therefore eligible for much lower rates. If you think this might be the case for you, speak to a mortgage specialist who can help you to decide whether remortgaging could be a profitable option.
You want to overpay your mortgage but your lender won't let you
Perhaps you've had a pay rise or inherited some money, and you want to overpay your mortgage. Unfortunately, some mortgage deals don’t allow overpayments, or the amount you can overpay by is capped.
If this is the case with your mortgage, then remortgaging might be a helpful option. A remortgage will allow you to reduce the loan size and potentially get a cheaper rate as a result.
However, it’s important that you consider that you may have to pay an early exit fee to get out of your current mortgage. Compare the exit fee with how much you'd save with the new, lower mortgage in order to understand whether it’s worth doing.
You want to borrow money against your home
Remortgaging can be an excellent option if you want to free up some money to help with home improvements, paying off debts, or even to pay for a wedding!
Remortgaging to free up equity is a great solution if you want fast access to cash.
You’ll borrow against the value of your home by taking out a new mortgage that is larger than your current loan. However, it’s worth noting that over the duration of your mortgage, this will cost you more in the long run because you’ll owe interest on a larger sum. Remortgaging allows you to switch to a different mortgage provider or product. By doing so, you can save money and often free up cash to be spent on large purchases.
Remortgaging: how can a mortgage broker help?
By speaking to an independent mortgage expert before remortgaging your home, you can choose from a wide selection of products with as little effort as possible. Your mortgage broker will guide you through the whole process and help you select the best deal for you.
