Remortgage? Why would you? There are many reasons why you may want to remortgage your property. But when you do, are you making the right decision? Like anything else, there are advantages as well as disadvantages when going in for a remortgage. In this article we will explore what you stand to gain or lose with a remortgage in the UK, read on to find out more.
What is remortgaging?
Remortgaging means taking out another mortgage to replace your existing deal. This may be because your current arrangement has reached the end of its term and you are seeking a better rate than your existing lender’s standard variable rate (SVR).
As a result of having built up equity in your home, remortgaging can be used as a means of generating additional cash for home renovations, for instance.
Why remortgage?
If you are on a fixed rate mortgage, your lender can switch it to a SVR (Standard Variable Rate) mortgage at the end of the term. This means you may have to pay a higher monthly rate depending on the base rate set by the Bank of England. You can avoid this rate change if you decide on remortgaging. This way you can explore better deals that are current, and if the deals available are better, you stand to gain by way of savings. To gain insight for better deals, consult and speak to a reliable mortgage adviser.
Pros of remortgaging
Once you have done your research and consulted a mortgage adviser, your next move probably would be to remortgage the property. Here are some benefits you may be able to look forward to when you remortgage.
- Gaining on interest rates:
One potential benefit may be improved interest rates, particularly if you are on your existing lender’s SVR. However, it is important that you speak with a mortgage adviser as they will be able to access a wide range of mortgage products, including some deals that are not available on the high street.
- Borrow more:
During the time of your current mortgage, your property value may have risen. If you’ve got plans to renovate your home or even build another section, you may want to remortgage in order to get a bit of extra funding. This additional money will help with your plans of developing the property or even with education related matters of your family. But keep in mind that the more you borrow, the higher the monthly repayment commitment will be.
- Avoiding SVR:
As described above, with your current mortgage coming to an end, you may be switched to a SVR by your lender, which could see you having to make a higher monthly payment. By going for a remortgage, you will be able to avoid this and stick to a more ‘wallet friendly’ method of mortgage. It’s best to do your research ahead of time before your current mortgage ends and decide on a lender that has better offers.
- Pay off a debt:
Essentially a mortgage means a debt. However, with a remortgaging, you might be able to generate enough funding to pay off another existing debt apart from the mortgage. This could be effective and a convenient way to pay off a debt that you may have had to take on for some other purpose such as purchase of a vehicle, furniture, etc. Speak to your mortgage broker if this can be an option to explore.
The cons of remortgaging
Here are a few negatives of remortgaging.
- Credit issues:
You may encounter difficulty on your remortgage if you’ve had issues on your credit score and settling your debts on time. This may seem as a deterrent when trying to obtain loans in future as well.
- Costs:
When moving from one lender to another, you may be required to bear a cost for the valuation of the property, arrangement fees and legal fees.
- Hidden charges:
Before getting into a remortgage, you need to carry out some careful research about the rates, terms and conditions and most importantly the costs. Many lenders offer free mortgage deals, however some lenders may not openly divulge all the costs involved. And you might be surprised to see added costs that you were never aware of.
Conclusion
As seen in this article, remortgaging can result in some important benefits. With a majority of property buyers taking on a mortgage to purchase a property in the UK, remortgaging is also a common practice. However, it is important to understand the advantages and disadvantages, and what these mean for you. Speak to one of our mortgage advisers, who will be able to recommend a new deal that is right for your unique individual circumstances.
| YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. |
* Approved by the Openwork Partnership on 04 October 2023
