We all understand the process of applying for mortgages when buying a new home, but what about remortgaging?
What is remortgaging? When should you consider remortgaging? In this article, we reveal the most common reasons for remortgaging so that you can choose whether it is the right option for you.
When you apply for a mortgage, you choose a mortgage deal and package that compromises on repayments according to the interest rate and term. Remortgaging involves switching your mortgage by taking a new mortgage agreement with different interest rates and terms. With house prices at an all-time high, now might be the perfect opportunity for homeowners to seriously consider remortgaging their home and reap the benefits.
Moveable has created a guide on remortgages, revealing the reasons for remortgaging, so you can ultimately choose whether this is the right move.
Remortgage your home if its value has increased
There’s no doubt that we’re in the hottest property market on record, with house prices up £8000 last month alone. On top of that, buyer demand seems to continue outstripping supply as the race for space continues.
For homeowners, this is fantastic news as property value has most certainly increased with demand, resulting in a lower loan-to-value band (LTV). Therefore, they are eligible for lower mortgage rates and lower monthly repayments – making it perfect to re-mortgage.
Remortgage your home to borrow more money
Now that hybrid working schemes look here to stay, those working from home may be looking to make their homes more palatable by making some home improvements. By remortgaging your home, the interest rate of a secured mortgage can be 2-3 times less than a personal loan – and 10 times cheaper than a credit card.
Keep in mind that your repayments will increase when you borrow more, and you will need to pass affordability checks. Some of the key factors that your lender will consider are:
- You must have had a mortgage with them for a certain amount of time
- You must be up to date with your mortgage repayments
- You will only be allowed to borrow over the minimum amount, and under a maximum amount within your affordability
Remortgage your home to get a better deal
Those who take out a new mortgage are likely to be on the introductory deal, meaning that they are on a low-fixed, discounted rate or low tracker rate for the first few years of the plan. Because introductory deals last around 2 to 5 years, buyers will often be moved onto their lender’s standard variable rate, which may be higher than other plans. So, when your introductory period ends, you could potentially switch to a new mortgage plan to ensure that you’re saving money.
Remortgage your home to beat rising interest rates
The Bank of England decides on whether interest rates go up or down, and after being hiked up twice already – now at 0.5% – it may not be worth remortgaging your home. However, if you find a lower rate being offered to new customers, you should definitely consider re-mortgaging.
Remortgage your home if you want to overpay
If you’ve recently come into extra money and want to overpay on your current deal, some lenders may not let you. As a workaround, many consider re-mortgaging to reduce loan sizes, and get a cheaper rate. However, keep in mind that you may have to pay an early repayment charge or an exit fee – don’t forget to compare prices before you make this move.
If you’re looking to move homes and transfer your current mortgage, you’re looking at porting your mortgage. You have the option to port your mortgage and increase your mortgage plan, port your mortgage and take out an additional loan, or pay off your current deal and get a new one.
When moving homes, Moveable can help by providing expert guides on everything you need to know so that you can make better-informed decisions. We also offer price-comparison tools to the many home-moving services and goods to ensure you’re getting the best deal possible. To try our money and time-saving tools, sign up here.