If you’re looking to raise funds from your property, it can be tricky to figure out whether a remortgage, further advance, or second charge mortgage is the best option for you.
Many homeowners aren’t fully aware of all the options available when it comes to borrowing against their home. In this blog, we’ll explain the basics and outline the key factors that might make one choice more beneficial than the other.
What is a Remortgage?
A remortgage is when you switch from your current mortgage deal to a new one.
Homeowners may either stay with their current lender for a better rate or move to a new lender altogether. One of the biggest benefits of remortgaging is the ability to reduce your monthly payments by securing a lower interest rate, especially if you are on the Standard Variable Rate.
However, remortgaging isn’t only about getting a better deal. You can also borrow additional funds from either your current or new lender, often for purposes such as home improvements, debt consolidation, or other personal financial goals.
Why Would I Remortgage?
There are several reasons why homeowners consider remortgaging, including:
- Borrowing for home improvements: If you’re planning a renovation or an extension, a remortgage can help raise the necessary funds.
- Lowering monthly repayments: Remortgaging to a better interest rate can significantly reduce what you pay each month.
- When your current deal ends: Many people remortgage when their fixed or introductory deal comes to an end.
- Debt consolidation: If you have multiple debts, consolidating them into your mortgage could simplify payments, although this could result in higher overall interest costs.
When is the Best Time to Remortgage?
The ideal time to remortgage is when your current mortgage deal is about to end. At this point, you can:
- Explore whether your existing lender offers a new interest rate, often called a product transfer.
- Consider switching to a new lender for potentially better deals.
Keep in mind that there may be fees involved with a new product or exit fees if you leave your current lender. A qualified broker, like Clever Mortgages, can help compare deals from your current provider and alternative lenders to ensure you get the best deal possible.
Alternatives to Remortgaging for Raising Funds
If you’re looking to raise additional funds for home improvements or debt consolidation, remortgaging might not always be the best option. Here are some alternatives:
- Further Advance: A further advance is when you request additional funds from your current lender, running alongside your existing mortgage. This involves a full mortgage application and credit check, and may come with a different interest rate than your original mortgage.
- Second Charge Mortgage: If remortgaging or securing a further advance isn’t feasible, a second charge mortgage may be the solution.
What is a Second Charge Mortgage?
A second charge mortgage allows you to borrow additional funds while keeping your current mortgage in place. This type of loan is secured against your property, just like your first mortgage, but operates as a separate loan.
Some lenders specialising in second charge mortgages can offer more flexible terms than mainstream lenders, especially if you’re self-employed or have a more complex financial situation. Additionally, if you already have a low-interest-rate mortgage, taking a second charge mortgage allows you to keep that rate while accessing the extra funds you need.
Why Choose a Second Charge Mortgage?
A second charge mortgage may be preferable if:
- You’re self-employed: Second charge lenders often have more flexible underwriting criteria than traditional mortgage lenders.
- You want to keep a low-interest mortgage: If your current mortgage has a very competitive rate, remortgaging could mean losing that rate. A second charge mortgage allows you to keep your original mortgage terms intact while borrowing more money.
Which Option is Best for You?
Whether a remortgage or a second charge mortgage is right for you will depend on your personal circumstances. For example:
- Remortgage might be better if your existing mortgage is at a high interest rate and you want to save on monthly payments or borrow additional funds.
- Second charge mortgage could be more suitable if you want to keep your current low-interest mortgage or need more flexible lending criteria.
An experienced mortgage broker, such as Clever Mortgages, can review your options and help you determine the best course of action based on your individual needs. Even if you’ve had financial challenges in the past, Clever Mortgages specialises in both remortgages and second charge products and can guide you to the best solution.
Need to Raise Funds from Your Property?
If you’re considering a remortgage or second charge mortgage for home improvements, debt consolidation, or another reason, Clever Mortgages can help. Contact our expert team today to find out how we can help you raise the funds you need while getting the best possible deal.
