Remortgaging – why and when should you consider it?
Remortgaging is taking out a new mortgage on a property you already have, either by renegotiating the terms of your present policy or taking out a new policy altogether.
A guide to remortgage
If you've stayed with the same lender throughout the period of your mortgage, then you could be paying more than is necessary. Likewise, if you consider remortgaging, you could save thousands of pounds a year. Remortgaging is renegotiating the terms of your mortgage and taking out a new one. The reasons why people remortgage vary. It could be to release some of the value of their home. This could pay for home improvements or because the homeowners need money to pay off debts elsewhere.
Initially, it's easy to be tempted by the reduced rates mortgage lenders give in order to take out a loan. A fixed-rate mortgage means you pay the same, attractive rate of interest for a set period of time. Once this time period finishes, your mortgage interest rate reverts to the lender's less attractive standard rate of interest. It's when this happens that you can look around for a better deal, either with your current lender or a new lender.
However, it's important to check you can do this without being given extra charges. Some mortgages have a clause which means you have to stay with the initial terms for a set period of time or else have financial penalties to pay. The best remortage deals are available to homeowners who have at least 25% equity in their home. For example, having a £150,000 mortgage outstanding on a home valued at £200,000 or more. It's naturally best to look at what the various lenders can offer you regarding remortgaging. Remember to take into account, factors such as application or valuation fees as these can decrease the other advantages of remortgaging.
As when you took out the original mortgage, you'll be able to access many offers open to people buying a property for the first time. You'll need to see what type of mortgage is best for you. Whether it's fixed-rate, capped rate or variable rate mortgages you should go for. As always, it can be best to take individual financial advice to help you make the right choice.