Remortgaging is a process that most homeowners will go through at some stage in their lives, yet many don’t fully understand what it is or how it works. There are a number of reasons why you might choose to remortgage your home, whether it’s to save or raise money.
What is a remortgage?
Remortgaging is quite simply the process of changing your mortgage product over to a new deal. This can either be with the same lender or by moving to a different provider. Switching your mortgage deal when moving house is also classed as a remortgage.
Why should you remortgage?
It’s now becoming less commonplace for people to stay with the same mortgage for the full term. This is because homeowners are continuing to see the benefits of remortgaging. You can use a remortgage for a number of reasons:
Remortgaging to save money
A remortgage can be used as a method of saving money by switching to a different deal with lower monthly payments. You might do this if:
Your current deal is about to end
The most common time people choose to remortgage is after the introductory period of your mortgage. At this time you might be on a fixed, tracker or discounted rate. Remortgaging allows people to shop around and make the most of the best deals and lowest interest rates available.
You’re looking for a better rate
Remortgages are mostly used to get a better deal on your existing mortgage. Although many wait until the end of their introductory period, some will also decide to switch midway through a deal if it actually saves money. However, there are usually exit fees that you will need to take into consideration when switching mortgages. ou should carefully do the maths beforehand.
A fixed mortgage is preferable
A lot of people prefer to be on a fixed term mortgage as it allows them to know exactly how much their mortgage costs will be each month. Many fixed mortgages are only available during the mortgage introductory period, moving onto a standard variable rate (SVR) where the rate will fluctuate. To avoid changing to an SVR many people will decide to switch to other fixed mortgages once their initial offer is complete.
Remortgaging to raise money
You can also use a remortgage to raise money by releasing some of the equity in your property. This is done by taking out a larger mortgage than the one you currently have. You might use these funds to:
Consolidate your debts
The money that you raise from remortgaging your home can be used to consolidate debt. Lenders won’t usually just allow you to take out a larger mortgage but are more likely to approve this if it’s to help improve your financial situation.
Carry out home improvements
Another reason that lenders will consider a remortgage as acceptable is to carry out home improvements. This might be for a new kitchen, a loft conversion or even an extension. Home improvements can either help to make your home more livable for you or could make it more attractive for future buyers.
For more information on remortgages, find out more information from a member of our team.