Is Remortgaging Right For you?

There are many reasons why you may consider remortgaging but generally they either relate to raising money or saving money in both the long and short-term. Read on to see if remortgaging is right for you.

Raising Money by Releasing Equity in Your Home

Equity in your home is defined as the difference between the current value of your house and any mortgage, remortgage or secured loan that is secured on the property. If you have lived in your home for a number of years then chances are your equity in the property will have increased, sometimes substantially. Remortgaging the property allows you take out some of that equity (usually up to a maximum of 90%) and use it for any legal purpose. People use remortgage monies for any number of things from extensions, garages, double glazing, holidays, new cars, weddings, education etc.

Paying Off Expensive Loans and Credit Cards (Consolidating Debt)

Generally speaking, personal loans, credit cards, store cards and hire purchase attract a higher rate of interest than a mortgage or remortgage. The monthly payments are also set at a level to enable the debt to be repaid in 3-5 years. This can mean for many that if their financial situation temporarily changes for the worse then these payments can become less affordable. Replacing this type of debt with monies from a remortgage will, subject to rate and term, usually significantly reduce your monthly outgoings. This can be hugely beneficial for your monthly cashflow but you must also be aware that one of the reasons why the monthly repayment reduces so much is that the debt is now being spread over a much longer term, which means it will take you longer to pay it off. For many people however, the benefit of a significant reduction in their monthly outgoings far outweighs the increase in time taken to pay off the loan.

A Better Mortgage Interest Rate

Many people change their mortgage regularly not to raise more money but to save money by obtaining a lower interest rate. A lower interest rate means your new lender, bank or building society will charge you less for borrowing money from them than the previous one did. This can simply mean having a lower monthly payment but if you have a capital repayment mortgage and maintain your monthly payment at the previous level then this will speed up the overall repayment of your mortgage balance. With interest rates currently at an all time low, for many people now is the perfect time to consider new remortgage deals.

A Better Mortgage Deal or Product

People’s financial circumstances are constantly changing and therefore it is a good idea to always keep a check on whether your mortgage or remortgage fits your current financial situation. If your property is worth more than when your original mortgage was taken out then you may qualify for a better rate with your own or another lender because of the increase in equity. If you had some historic credit problems the last time you took out a mortgage but that was over five years ago and since then you have kept a clean credit record then you may qualify for a lower interest rate. Maybe you have received an inheritance or a large bonus and you want to pay off some of your mortgage. This may mean that you will now be borrowing less of the equity in your property and may qualify for a better deal with another lender. There are numerous changes in circumstances that may qualify you for remortgage deals and ultimately save you money.