What is a remortgage and how can it benefit you? Simply speaking, a remortgage is the process of switching from your current mortgage plan to a better deal, typically with another lender.
There are many reasons one may opt for a new mortgage. Listed below are some helpful tips when considering a remortgage to help you decide if it’s right for you.
Saving You Money: We all want a better deal and why wouldn’t we? We work hard for our money and it’s senseless to pay more for anything, let alone the expense of a mortgage, if we don’t have to. Often times, when you take out a new mortgage with a lender you receive a special rate, for example a fixed-rate deal for new customers. You probably received this low APR rate when you signed up with your current lender. However, once your special rate ends, you will most likely be paying the lender’s Standard Variable Rate (SVR) which may be much higher than the competition. Remortgaging with a new lender can save you a lot of money by taking advantage of lower rates offered to new customers and avoid the high SVR rates of your current provider
Borrowing Money: A remortgage loan does not necessarily mean switching to a new lender. You may be happy with your current mortgage set up and instead would like to withdraw funds against the equity built up in your property. Remortgaging can be a very cost effective way to invest in your home e.g. remodelling your kitchen or building an addition. As a homeowner, you can borrow secured financing from second party lenders however, the option of a remortgage to raise money could yield a much lower interest rate than secured or unsecured loans.
Pay Off High Interest Debts: Short-term debts like personal unsecured loans, credit cards, store cards and overdrafts tend to carry hefty interest rates. By remortgaging for the purpose of debt consolidation you can greatly reduce the amount of interest you owe for these types of debts thus saving you money in the long run.
The reasons listed above are typically why a homeowner may decide to remortgage their home. However, there are a few caveats to consider before switching. First and foremost, do your research.
Two of the simplest methods to find the best deal are:
Spend time comparing deals online. Remember, there can be thousands of mortgage products to sift through but it will be worth your while to compare the Whole of Market for a deal that suits your financial circumstances.
Work in collaboration with a certified mortgage broker. They have access to most, if not all, of the mortgage products available and can help you understand the repayment terms and any associated costs and fees when you remortgage.
Be sure to ask your current lender if there are any early redemption penalties if you choose to switch to another lender. In addition, a new lender may also require you to pay certain fees such as an arrangement fee, a valuation fee, a solicitor’s fee, a higher lending fee or any combination of the above. Keep in mind, most new lenders would love your business and may even offer to waive some or all of these fees to entice you to switch to them. A qualified mortgage broker will be able to help you determine the costs associated with a remortgage.
As with any type of borrowing, be sure the numbers stack up. The goal is to save you money. Shop around, speak to a mortgage broker or adviser, and take advantage of the deals offered to new customers to ensure you reap the benefits of a remortgage.
