Do you currently have a mortgage? Would you like to get a different or better deal without moving home? This is a remortgage. Changing the terms and conditions or type of your mortgage with your current lender or switching lenders to get a better deal whilst staying in your property means you are remortgaging you home.
There are certainly many advantages of remortgaging your home. But as with anything remortgages aren't for everyone. It is important to weigh up the pros and cons with regards to switching to make sure that making the change doesn't leave you out of pocket.
Your mortgage is probably your biggest expenditure there could be big savings to be had. Often when you initially take out your mortgage you are put on an introductory rate, once that rate period is over, usually between 2-5 years you will often be automatically transferred over to your lender's standard variable rate. This is the rate that could see your mortgage costing you more in the long run. If you compare the mortgage market you will be able to see the differences between the various lenders' rates to see if you still have a good deal or not.
The average UK mortgage is £112,000; just saving 1% on this mortgage could save you up to £90 per month.
It's not just about the savings, your circumstances may have changed since you initially took out your mortgage which may either allow you to pay more each month or require you to pay less. Changing your mortgage to fit your current circumstances will help you in the long term be able to meet repayments or even pay off your mortgage earlier than expected.
But there is no such thing as a free lunch I am afraid and changing your mortgage will cost you. How much it costs will depend on your current provider and the type of mortgage that you are on. If you are on a fixed term mortgage, you may incur a penalty for paying off your mortgage early, often referred to as an early repayment or redemption charge. In your mind you may not actually be paying off your mortgage early but effectively when you remortgage with a new lender that is what you are doing with the previous lender. Some lenders have a one off administration fee to cover what they class as 'administration costs'. This is charged up front and is often referred to as a product fee. Legal and valuation fees will also need to be paid. Even though you paid these when you originally took out your first mortgage, when switching providers they will need to be done again. A new lender needs to know the current valuation of the property, which may have changed, before they will agree to the mortgage and you will need a solicitor again to do the conveyance, from valuation surveys to fund transfers.
These costs should be weighed up against the actual saving you will make from moving your mortgage.
There are many reasons people choose to remortgage. When you have equity in your home, rather than take out a new loan which may have a higher interest rate you could increase the percentage of your home's value that you borrow against. This can help you raise money for big home improvement projects which in the long term could increase your property's value. It may enable you to consolidate any previous debts under one easier and possibly cheaper repayment. You may just have an unexpected expenditure that you need to cover, such as a wedding.
People will often change their mortgage as their circumstances change. You may have a new job with a pay rise giving you more monthly cash flow. If you want to pay off your mortgage earlier than expected you can change your mortgage to allow you to pay more and therefore may be save some money in the long term on interest. The same can be said in the opposite direction. You may have started a family since you took out your mortgage and have less monthly cash flow and need your mortgage to reflect this.
Some people just want a better deal. Once the initial introductory rate is over your mortgage interest could go up suddenly. To keep the long term costs down people will often remortgage to a better interest rate so that over the years they will be paying less back to the lender.
There are several types of mortgages to choose from and depending on which mortgage you are coming from and your circumstances will help decide which mortgage to move to.
Offset Remortgages - this can link your savings and in some instances your current account to your mortgage. When doing this you won't earn interest on your savings but you will pay less interest on your mortgage. Offset mortgages are calculated daily so each pound on deposit works hard at reducing the borrowing costs.
Fixed Rate Remortgages - you agree with your lender on a fixed interest rate over a pre-specified amount of time. If you worry about interest rates going up in the future due to the market projects, this type of mortgage will ensure no matter how the market performs you will stay at the specified interest rate.
Discount Remortgages - is a mortgage which has a discounted interest rate for an agreed period of time. This could be a 1% discount on your current provider's SVR. As this is a variable rate mortgage, the interest rate can go up or down during the discount period. Whether or not the interest rate will change will depend on how the housing market is performing.
Tracker Remortgages - These mortgages will track the base rate set by the bank of England. If the Bank of England's rates change no matter if it is up or down so too will your rates.
You may be extremely savvy in finding the best deals on your broadband or mobile phone and comparing remortgage rates on SoSmart Money will give you a great idea of what the market can offer you. You could be super confident in your money saving ways but choosing the right mortgage that works for your now and possible in the future is tricky business. Using a broker can help you be better advised before taking a the plunge and can explain all the needed criteria to help you get your wanted mortgage. Once you have a quote on SoSmart Money we can put you in touch with an impartial adviser from Turn Key mortgages, you can request a call back at a time that suits you. Or you can call straight through to them.
The above post is intended to be informative but does not constitute advice - financial, legal or otherwise. Any opinions given are the author's own and do not necessarily reflect the views of SO Media or the Mitchell Farrar Group.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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