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The Benefits of Remortgaging

The Benefits of Remortgaging

The majority of us will have to take out a mortgage to cover the cost of a home but mortgage deals are only in place for a certain period of time. This can range from one year to five years whereby a rate is fixed in place during this period. Once the period comes to an end, you are likely to find that you are moved onto a more expensive Standard Variable Rate which means your repayments go up. So, to avoid these higher costs, you can remortgage and agree a new deal with a new lender which means you keep your payments at an amount that is fixed and affordable but what are the other benefits of remortgaging?

Get a Better Rate

As we have mentioned, when your existing mortgage deal ends you’ll be moved onto a higher rate. However, once you remortgage, you will move away from this higher rate and a rate that is almost always lower. This means that you could save a considerable amount of money each year when you remortgage.

Benefit From House Price Increases

Prior to remortgaging, the amount you owe is reassessed against the value that your home was worth. This then makes it possible to calculate your loan-to-value which enables lenders to determine risk. If your house has increased in value since you took out your previous mortgage then you are likely to have a loan-to-value that comes with a lower rate.

You Can Borrow More Money

If you remortgage it gives you the opportunity to raise cash that you can use for other things. In many cases, the rate that you can secure with a mortgage is often less than that of a loan or credit card but if you do want to remortgage for additional money then the lender will want to know why. There are common reasons why people want to remortgage to release additional funds and this is often related to debt consolidation or home improvements.

Some lenders will put criteria in place in order to be able to access the additional money. This might include the likes of having a mortgage with them for so many years or you must be up-to-date with your repayments.

Pay off Your Mortgage Faster

If you have received a pay rise or have been given a lump sum, you might want to pay off your mortgage quicker. In order to do this, you can make overpayments but many lenders won’t allow you to do that and some that do allow it will only let you overpay by a fixed amount each month. Of course, the longer you owe a lender money, the more interest they earn. However, if you have a goal of overpaying in order to pay your mortgage off faster then you can remortgage to a new lender that makes it possible to overpay without any charges or restrictions.

If you are thinking about remortgaging then it can help to seek professional advice. This will ensure you make the right decision and a deal that meets your needs.