What are the Benefits of Remortgaging?
Remortgaging is when you get a new mortgage deal on your property from a different lender. You may do it for the benefit you gain from better interest rates or better terms, or to borrow more money against the value of your home. Depending on the terms of your first mortgage, and how much more of it you must pay off, you may or may not be financially better off by remortgaging.
However, if the financial benefits are suitable for your current situation then remortgaging might be the right solution for you. Read more below about the benefits of remortgaging.
Taking Advantage of a Better Rate
Some mortgages, for example, fixed-rate and tracker mortgages, change to a higher rate after a certain period, typically between two and five years. While your lender would have checked to make sure you could afford the rates even after they rose, that does not mean you are not feeling the effects when they happen!
Mortgaging can allow you to take out a new loan with lower monthly repayments, reducing your outgoings and making your home more affordable.
Change to a Mortgage that Better Suits Your Current Situation
The longer you have had your mortgage, the more likely it is that your circumstances have changed. Maybe you took out a mortgage with low monthly repayments, which would take you a long time to pay off. If you did that but now have a larger income, remortgaging might mean you could find a loan you could pay off more quickly, through making larger monthly repayments. Equally, if your mortgage has become harder for you to afford, re-mortgaging would allow you to change to repayments more in line with your current income.
May Increase the Value of Your Home
If your home has increased considerably in value since you took out your original mortgage, you could now be enjoying a lower rate of interest. This is because the amount you borrowed now represents a much smaller proportion of the value of the house than it did when you bought it.
In the same way, you now own a much bigger proportion of the house than your original deposit once covered. Both these factors mean that you are now a smaller risk to the lender than you originally were, so you could be rewarded with a lower rate of interest and lower monthly repayments.
You May Need the Money
If you need to borrow money for home improvements or to buy a new car, or you would like to consolidate your loans, remortgaging can allow you to do it. You will take out a new mortgage to cover the remaining loan towards your house and add the cost of the home improvements or car on top.
This can be an effective way of borrowing money as interest rates on mortgages are often lower than interest rates on bank loans, and considerably lower than interest rates on credit cards. However, you will spend longer paying off your re-mortgage as it is obviously more, which is important to consider.
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