What is a Remortage and Why Refinancing?
A remortgage is the process of moving your mortgage and product from one company to another. The primary purpose of a remortgage is to save money on your monthly payments. Your home is probably the biggest investment so it logically follows that finding a way to save money on this investment could make a significant difference in your monthly budget.
Options to remortgage can be with the existing company or alternatively with a new lender. Most lenders will allow you to remortgage with them, without any costs. Offering you Free Valuation, Free legal and depending on the mortgage size No arrangement fees. All lenders offer similar products some with fees some without. It is worthwhile reviewing all the options before you decide on the one that suits you.
Our appointments can be carried out at our office or your home, at a time that suits you. We don’t just work 9 till 5. These meetings are free. No costs just time to find out more about what you want from your mortgage, we can then find the mortgage that suits your needs and requirements. We work with you, for you to find the deal that best suits you. By working together, we can help you make the savings that mean remortgage is not only worthwhile but as stress free as possible.
Reasons to Remortgage
To reduce the monthly payments.
When you take out a new mortgage, you normally receive an introductory deal – for example a low fixed rate for a specific term normally 2 or 5 years. Once the deal ends you’ll probably be moved onto your lender’s standard variable rate (SVR). This is individual to each lender normally around 4% - 6%.
If you have some unsecured debt, like a loan or a credit card you may want to consider a remortgage and consolidate this in to one monthly payment. While this could save you money on a monthly basis you should also consider this will be paid over a longer term and could be more expensive in the long run. Some lenders could restrict the amount you could consolidate with them.
You may be able to borrow extra money to complete home improvements. If you like the current property but would like to maybe add an extension to suit your needs, most lenders will allow you to increase your borrowing to complete these home improvements.
Remortgaging for more flexibility
Remortgaging may also enable you to receive a more flexible deal. If you want to reduce or increase the term, want a more flexible mortgage or link the mortgage to a bank account.
Changing the loan to value
Has the property value increased and reduced the loan to value? Loan to value is the percentage of the property value owned by lender, i.e. Property value £100,000 and a mortgage of £60,000 total 60% LTV
Disadvantages of Remortgaging
What to watch out for
• A new underwriting process will be started with the lender. Payslips and Bank Statements would need to be assessed by the lender. This means the new lender would have to assess all of the paperwork before they would allow you to proceed.
• New valuation will be needed. This could change the mortgage on offer. All surveyors are different and you can see the independent value of the property reduce below the expected amount. This could change the mortgage offer available from the lender.
• New lending rules mean lenders will have to check you can afford the mortgage and also “stress test” to determine that you will be able to afford the mortgage payments in the future if interest rates were to rise.
Disadvantages of consolidating debts into your mortgage
• All your debt is now secured against your property. That means if you can’t keep up your repayments, you may lose your home. Debts such as personal loans and credit cards are not secured against your home.
• Once you’ve remortgaged, you may think you’ve ‘solved’ the problem and carry on spending. Then you’ll run up more debt – perhaps on your credit card – and your situation will be even worse. Debt consolidation only makes sense if you use it as an opportunity to get back on track and cut your spending.
• Repaying the mortgage debt over 20 years works out as the most expensive option – even though the interest rate is low. When you consolidate, you may not realise that it’s taking you a long time to pay off your debt, and that can be expensive. If you pay off debts in this way, make sure you borrow it over the shortest period you can.
• Stay with existing lender. You should always check with the existing lender on what mortgage they would offer you to stay with them. This can be done through us or via a phone call direct to the lender. Don’t forget the individual lender can only offer you products from their own range.
• Secured loan: If you want to raise extra money you can approach a second lender to give you a ‘top up’. This can be used to pay for the home improvements or debt consolidation. Fees are often higher than a mortgage but something that should be considered.
• Unsecured loan. As above, if you want to consolidate a small amount maybe an unsecured loan would be a better option than a longer term mortgage or secured loan.