Remortgaging
Remortgaging is a simple concept, switching from one mortgage to another but one which could save you thousands of pounds. And whilst it may not be a case of the grass is greener on the other side, it is definitely worth taking a peek over the fence. So how does it work?
Most mortgages, whether fixed or variable, have an introductory period where the interest rate is more favourable than the lender’s Standard Variable Rate (SVR). At the end of this introductory period the mortgage will revert to the lender’s SVR which, subject to interest rate fluctuations, is often higher than your initial rate. However by remortgaging, either with your original lender if they offer a suitably attractive product or by moving to another lender if they can offer you a better deal, it is possible to minimise any future payments. You may also benefit from any additional extras the lender is offering, such as flexible features or daily interest calculations.
Remortgaging can also offer more than just an opportunity to obtain a more favourable mortgage product. If your home has risen in value since you bought it, there will now be equity locked up in it. (Equity is the stake that you own in your home, i.e. the property value less the mortgage loan outstanding). When you remortgage it is possible to release this equity, turning it into cash.
For instance, if you had an outstanding mortgage of say £100,000 and the property is now valued at £150,000, you would own £50,000 worth of equity in it. So were you to remortgage for say £130,000 you would be releasing £30,000 worth of equity. Some lenders place limitations on what you can or can’t use this money for. Many however make no such restrictions, leaving you to spend the money where and how you like. Perhaps home improvements, a new car, or even a deposit for that place in the sun?
Remortgaging is not necessarily for everyone though, particularly for those with early repayment charges, and it is not simply a case of looking for the mortgage with the lowest interest rate. Each mortgage will have positive and negative features; to understand how they affect you it is probably best to seek professional advice from an independent mortgage advisor. Until then here a few questions to get the ball rolling:
• What are my current repayments?
• Do I have any early repayment charges and, if so, can I save these by moving?
• What type of mortgage would suit my needs now (including the critical question how much can you afford to pay)?
• Can I get a mortgage that gives me lower repayments and meets those needs?
• What additional costs are involved?
For more information, please contact us