Understanding Remortgaging: Why and When to Consider It

Understanding Remortgaging: Why and When to Consider It

Circumstances change, as do financial markets, so as a homeowner there can come a time when you might consider remortgaging—either to save money, borrow more, or adjust to a new financial situation. But what exactly is remortgaging, and when should you consider it? Here’s what you need to know, the process and its potential benefits.

What is Remortgaging?

Remortgaging is when you switch your existing mortgage to a new deal, either with your current lender or a different one. This doesn’t mean moving house; it’s about changing the terms of your mortgage to better suit your needs or to take advantage of better interest rates on the market.

Benefits of Remortgaging

Lower Interest Rates: One of the main reasons to remortgage is to get a lower interest rate, potentially making significant savings on your monthly repayments.

Fixed-Rate Expiration: If your current deal, especially a fixed-rate mortgage, is about to end, remortgaging can help you avoid reverting to your lender’s higher standard variable rate (SVR).

Equity Release: Remortgaging can allow you to release some of the equity built up in your property. This can be a good way of getting funds for home improvements, debt consolidation, or other big outlays..

Changing Mortgage Types: Your financial situation or preferences might change, prompting a switch from, say, an interest-only to a repayment mortgage, or vice versa.

Overpaying Your Mortgage: Some mortgage deals limit how much you can overpay. Remortgaging can offer more flexibility and allow you to pay off your mortgage sooner.

When to Remortgage

End of Your Current Deal: As your current mortgage deal comes to an end, it’s wise to shop around for a better rate rather than automatically moving to your lender’s SVR.

Improved Credit Score: If your credit rating has improved since you took out your current mortgage, you may now qualify for a lower rate.

Home Value Increase: If your home has increased in value, you might find yourself in a lower loan-to-value – a way lenders compare a loan amount to the value of the asset purchased with the loan – bracket, and therefore eligible for lower rates.

Interest Rate Changes: If interest rates are predicted to rise, locking in a lower rate before they do can save you money in the long run.

Financial Changes: Changes in your financial situation, such as an increase in income or receiving an inheritance might make remortgaging to a better deal more available.

What to Consider Before Remortgaging

Early Repayment Charges: Check if your current mortgage has early repayment charges and whether it’s financially beneficial to remortgage before they expire.

Additional Costs: Be aware of any fees associated with setting up a new mortgage, including arrangement fees, valuation fees, and legal costs.

Loan-to-Value Ratio: Your loan-to-value ratio significantly affects the rates you can access. The lower loan-to value, the better the rates you’re likely to be offered.

Remortgaging can be an excellent, strategic financial decision, offering opportunities to save money, reduce the term of your mortgage, or release equity. However, it’s vital to carefully weigh the benefits against any potential costs..

At ABC Mortgages we can help you explore the options that best suit your needs and guide you through the process.

As always, we hope this helps! For more information on how ABC Mortgages can help you with your mortgage needs you can contact us through the information below.

Thanks,
Bill Muir
ABC Mortgages

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