In and Outs of Remortgaging

Remortgaging

Having a mortgage is probably going to be your biggest financial commitment, but it does not mean that you must stick with the original ‘deal’. Through time, better deals may be offered by the banks and building societies, and changes in your own financial and personal circumstances may force you to revisit your borrowing commitments.

Once again, Reach 4 Mortgages will be here to help you with this important decision.

In simple terms, remortgaging involves changing to another mortgage deal. This may be with the same lender or you may switch to a different company completely.

 

Why might I/we choose to remortgage?

  • You are after a better interest rate than you are currently paying.
  • Your current mortgage deal may be coming up for renewal
  • You are wanting to change mortgage type e.g. from interest-only to repayment
  • You want to be able to make overpayments

Remortgaging is much like changing your gas/electricity or phone/broadband supplier. Shopping around can considerably help your monthly finances. As with any financial change, there will be pros and cons to consider.

Some of the pros of remortgaging include:

    • Borrowing at a lower interest rate
    • Utilizing the equity in your home for additional cash
    • Switching to a product more suitable to your current financial situation
    • Consolidating debts into an affordable single monthly payment

Some of the cons of remortgaging include:

    • Check if your current deal has an ‘early repayment charge’. If it has, you will have to ensure that the cost of paying this off is more than benefited by the new mortgage deal/rate.
    • Is the new deal on offer a ‘fee free’ mortgage deal? If it isn’t you will once again have to weigh up the possible costs against possible savings on the new deal.
    • As with any mortgage deals, your home will be used as collateral and could be repossessed should you fail to make the payments.

Check your loan-to-value (LTV). The lower your LTV the more mortgage deals may be available to you. Your LTV is worked out by dividing your outstanding mortgage balance by your property’s current value. For example:

Your outstanding mortgage is £200,000. Your property is valued at £500,000.

200,000 divided by 500,000 is 0.4.

0.4 x 100 = 40

Your LTV is therefore 40%

Are you mortgage ready? The same advise applies to remortgaging as it did when you took out your original deal. Lenders will be checking your ability to repay, so it’s equally important to check your credit score.

Speaking to one of our mortgage advisers at Reach 4 Mortgages will help you to understand the criteria that lenders are looking for. We will also help you compare mortgage deals and find the right one for you. With access to over 90 lenders and 12,000 mortgages, we will save you time and hassle.

Contact us now at Reach 4 Mortgages and speak to your personal adviser.

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Because we play by the book we want to tell you that…

Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.

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