Is It Time For You To Remortgage?

More often than not, once people have a mortgage in place, it can get pushed to the back of their minds after they’ve moved into their new home, rarely thought about again.

However, much like other financial products and plans, such as mobile phone tariffs, broadband contracts and tv services, it’s just as important to keep an eye on your mortgage product. It’s been reported that remortgage approvals have risen by 9% on average, year on year, which means that it could be a great time for you to consider remortgaging too.

Here are 6 reasons why you should consider remortgaging:

1. To get a better mortgage rate & reduce monthly bills

The current mortgage market is very competitive, meaning there are interest rates on offer that could help you reduce your monthly mortgage payments significantly. When remortgaging, you can either remortgage with your current lender if they can offer a competitive deal, or move to a different lender. If you were to remain with your current lender, the remortgage costs will be less as there will be no need for a survey or legal work to happen - you’d simply transfer onto a different mortgage deal.

For many, mortgage payments can be your biggest expenditure each month, and so reducing it can lead to substantial savings. However, people are more likely to choose to simply stay with their current lender instead of shopping around before renewing. If you were to negotiate skillfully with your provider, or even shop around, remortgaging could save you a great deal of money each year.

2. Home improvements

If you are planning to undertake some major home improvement projects, then you could borrow more money to finance these by remortgaging. Of course, there are different options for this, depending on your situation.

• Borrowing more money by way of a further advance

If you are happy with your current provider, or you’re in the middle of a fixed-rate term, then borrowing more money by way of a further advance could be the best way to raise finance. Your current lender will still have to make sure that your current income will cover the additional mortgage payments, likely by carrying out a credit check.

• Remortgage with another lender

Choosing to remortgage with a different lender means that you have the opportunity to search the whole of the mortgage market to find the best deal for you and your circumstances. However, the costs involved with moving your mortgage to a new lender will be higher than staying, so you will need to make sure that the money you will save by moving to a better rate will also outweigh the costs of the move itself.

3. Debt consolidation

If you have any short-term loans or credit card debt across a number of different providers, you could pay these off by raising money with a remortgage, which would leave you with a single, lower monthly payment. There are, however, a few issues that could arise when remortgaging to consolidate debt:

• You will be paying off this debt over a longer period of time, and therefore you will be paying more interest in the long run

• Once you have cleared your short-term loans and debt, there may be a temptation to follow this route again in the future and result in additional short-term debt.

• Your debts will become secured on your property

4. Change in circumstances

Your current mortgage was agreed using the information that you provided at that time, and this may have meant the range of mortgage options available to you was restricted. If your income has since increased or your credit score has improved, then you may qualify for a mortgage with a lower interest rate or one with more flexible and advantageous terms.

5. Reduce the mortgage term

If you remortgage onto a lower interest rate, then it would make sense financially to also shorten the term of your mortgage, which would reduce the amount of interest you will pay over the lifetime of the loan. If you can afford to do so, increasing your mortgage payments by even a small amount each month would shave off years and thousands of pounds worth of interest in the long run.

6. Releasing Equity

If you’re planning to do some home improvements or buy a second property, remortgaging to release some equity from your current property is one way of raising finance. Equity is the difference between the current value of your property and your outstanding mortgage balance. The greater this difference is, the better your position when it comes to releasing equity.

If you are nearing the end of your fixed-term mortgage deal then this could be a good time to consider equity release as you could remortgage to a competitive rate and at the same time release the equity that you require.

One thing to remember when releasing equity in this way is that you will still be repaying the amount over the remainder of your mortgage term, so you must consider carefully how you are going to use the money. If, for example, you are looking to start a business with this money, then you need to contemplate what will happen if your business venture is unsuccessful and you are left with an increased mortgage to repay.

Mortgage Thoughts is an award-winning whole of market mortgage broker, with expertise in specialist cases. If you are looking to remortgage, contact us today and see what we can do for you.