Before committing to a remortgage, homeowners must make sure they receive mortgage advice, because it is a big decision with financial implications. Many homeowners have found remortgaging to be useful in solving their problems and improving their financial situations.
How Does Remortgaging Work?
Remortgaging is the process of switching your existing mortgage from one lender to another. Your previous mortgage will be replaced by your new one.
What are the Advantages of Remortgaging?
There are many reasons why you may be looking to remortgage your property. These could include:
Better interest rates
You may wish to remortgage your home if you believe you can receive a lower interest rate on a new loan. This might be due to unforeseen circumstances, such as an increase in the value of your home or a change in your loan-to-value (LTV), which assesses the amount of your mortgage in relation to the actual worth of the property in question.
Wanting more repayment flexibility
One advantage of a remortgage over a new mortgage is that it allows you more freedom in the way you choose to repay your loan.
For example, remortgaging allows you to choose a repayment plan that suits your needs and lifestyle. Instead of sticking to your lender’s strict monthly repayment rate, you could opt for a repayment plan that frees up your income to spend on other priorities, such as holidays or your children’s education.
A less obvious advantage that remortgaging gives you access to is the ability to offset your mortgage. This is especially beneficial for younger homeowners, who may have plans for big purchases, such as buying a car or planning a wedding. You can use the loan balance on your mortgage instead of your actual savings for the purchase, reducing the amount of money you need to save before you can afford your big day.
What are the Costs Involved in Remortgaging?
The cost of remortgaging is determined by various factors, including those unique to the specific mortgage. The cost of remortgaging is influenced by the amount left on the previous mortgage, the current monthly payments, and personal circumstances.
You must, however, consider and budget for the following costs:
- Check your existing mortgage conditions for an early repayment fee to your old lender, which might cost up to 5% of your mortgage.
- A deeds release fee (or admin charge) to your present lender, which isn’t usually required but can cost up to £300 if it is.
- An arrangement charge, which may range from £0 to £1,000, is due to your new lender.
- A property appraisal charge is payable to your new lender and may be free or paid for by you.
- A conveyancing charge might be free if you choose the lender’s approved conveyancer or up to £400.
- A broker charge, if applicable, which may vary based on your circumstances.
You will also have to handle your new mortgage payments each month.
Conclusion
The decision to remortgage should be based on how it will benefit you financially in the long run. As interest rates continually fall, and more homeowners are struggling to pay their mortgage, it is likely that many will consider remortgaging their property.
However, it is important to consider all your options, including the cost of remortgaging.
Unless you are in serious financial difficulty and your remortgage will help you resolve this, you may be better off waiting until the general state of the economy improves and home prices rise, making it easier to sell your property.
If you want to get started on your way to your dream home, A Move Brokers can help you get there. We are the best mortgage brokers in the business, offering consultancy from experts to help you find your new home. Get in touch with us today to learn more.
This article is for information only and should not be seen as advice or a recommendation to act. As a mortgage is secured against your home or property, it may be repossessed if you do not keep up the mortgage repayments.