Remortgaging your Home

Remortgaging is the name given to the procedure when a borrower who has a mortgage with a particular company switches it to another company or to a different product with the same company, usually with a lower rate. Remortgaging is a popular thing to do – over 40% of all new loans every month in the UK are remortgages.

There are several reasons why a homeowner might want to remortgage. The most obvious reason is to save money by having a lower interest rate and lower monthly mortgage payments. Some people remortgage in order to raise money for big expenses such as home improvement, a new car or an expensive holiday.

Some homeowners remortgage in order to consolidate various debts, such as credit card debt and have lower monthly payments – be careful if you do this, as the increased amount of the loan is secured by the value of your home. In order to get cash back from a remortgage, you must normally have equity in your home for at least the amount you are remortgaging for.

Unfortunately, remortgaging is not quite as good a bargain as it was several years ago as many banks and building societies have raised the fees that they assess to anyone who transfers their loan to another company. And don’t forget the various fees and charges that you will be assessed from your new lender when remortgaging. Your lender should be able to give you an estimate and a final figure for these costs.

However, most financial experts agree that unless you currently have an excellent mortgage rate or are planning to pay off your mortgage in the next year or two, it still makes financial sense to remortgage. As an example, if you have a 150,000 pound mortgage at 6.5% and you remortgage at 4.5% you could save up to 1500 pounds in a year.

Remortgaging isn’t the right thing for everyone. If you only have a few years left to pay off your mortgage, or the amount you owe is small, any financial savings will be offset by the costs involved to do the remortgage. Similarly, if you already have a small mortgage – less than 25,000 pounds – it probably doesn’t pay to remortgage.

And if you have recently changed jobs, you may find it hard to be approved as many employers require you to have been employed by the same company for a certain period of time. You will also have to pass a credit check in order to qualify – or be stuck with a higher interest rate if your credit isn’t good. Many UK lenders also require a deposit of 5% or 10%.

Remortgaging can be a confusing business. However, a home is the single most expensive thing most of us will own in our life – and it is worth taking a little trouble to save some money or pay off some debts. Statistics show that most homeowners in the UK could actually save money if they bothered to remortgage.