Our Mortgage Consultant, Kay Brown highlights what the main reasons for considering a remortgage.
1) You can get a lower rate
One of the biggest reasons people remortgage is to save money by moving on to a lower rate.
When you first take out a mortgage you will normally be given a discounted rate or a low tracker rate. Once that deal ends you will usually be moved on to the lender’s standard variable rate, which tends to be higher – so lots of homeowners think about remortgaging at this point. One in five mortgage borrowers pays over the odds by staying on a lender’s Standard Variable Rate (SVR). This is usually several % higher than the most competitive new deals available on the market.
Based on a 75% LTV on a £250,000 house over 25 years, your monthly repayment would be £1067 on an SVR of 4.74%
By switching to a more competitive rate of 2.2% on a 5 year fixed rate, you could benefit from a more competitive monthly repayment of £814 per month.
This would save you almost £253 a month by remortgaging to a more competitive deal (that’s £3036 over 12 months).
As the base rate and the mortgage rate are often closely linked, many experts believe now is a great time to get a new deal, especially if you are stuck on a high standard variable rate.
2) You can choose a more secure deal
If you are on a variable rate and interest rates increase, you might want to consider remortgaging to a fixed rate. By remortgaging with a new lender you can switch to a lower fixed rate and reduce your payments accordingly. This keeps your monthly payments to a set amount, which means you don’t have to worry that you will have to pay more if interest rates increase.
If you opt for a fixed rate mortgage this is likely to be higher than a tracker, but it will give you the added security of knowing how much you are going to pay monthly.
Another reason to remortgage is to reduce the payment term. By finding a cheaper deal and keeping repayments the same, you could, in fact, pay off your mortgage more quickly.
3) You will be able to make home enhancements
Instead of moving, you may want to remain where you are. In which case extending your house, renovating a kitchen or bathroom or carrying out a loft conversion can all add value to your property. Many mortgage lenders offer special rates to homeowners who want to remortgage to make home enhancements, and some allow you to borrow more money than usual for this purpose.
4) You can combine your debts
If you have a lot of credit card and loan debt, you could reduce your monthly payments by combining your debts into your mortgage. This is because the interest rate on a mortgage is often lower than the interest rate on a credit card. This comes with the warning, however, that adding these debts to your mortgage may also cost you more over the longer term.
5) You will help your kids onto the property ladder
House prices in many parts of the United Kingdom have trebled over the past 10 years. This leaves many young buyers today struggling to purchase their first home. You can release some of your equity from your home and help your family financially by remortgaging.
6) You can raise some money
You may want some cash to finance an expensive purchase. Remember that with a mortgage you are putting your home at risk if you fail to meet the payments, so don’t overdo yourself.
7) You can become a normal borrower again
If you were self-employed or had a bad credit history when you took out your existing mortgage, you probably have been put on a greater rate than a normal borrower. You could get a better deal and a cheaper rate by remortgaging.
Use our mortgage calculator for an indication of what your mortgage repayments may look like.
See our latest mortgage deals for an indication of the latest mortgage offers available.