Remortgaging has many benefits for homeowners, including reducing monthly repayments, borrowing against equity, getting lower interest rates, and debt consolidation.
Remortgaging often sounds like a scary term that not many understand, but we’re here to provide an in-depth insight into remortgaging, including what it is and the reasons why people choose to do so. To learn more about the six reasons people remortgage their homes, keep reading…
What does it mean to remortgage?
Do you understand what remortgaging your home means? Many people don’t, so we’re here to clear it up, helping you to determine what’s best for you. To remortgage simply means to take out a new mortgage on the property that you already own. Taking out a new mortgage means that your current one will be replaced, or it instead allows you to borrow money against your property.
Why do people remortgage their homes?
1. Your Current Mortgage Deal is Coming to an End
This type of remortgage reason is often known as a forced remortgage. When you take out a mortgage which is a fixed rate, they often only last for a number of years, e.g. 2 to 5 years. After this time, the rate will transfer to the mortgage provider’s standard variable rate (SVR). If the SVR is not suitable, for example, it is overpriced and could cost you a considerable amount in interest, you can choose to remortgage your property to find a better deal
2. To Get a Better Interest Rate
Switching mortgage providers can allow you to find a better interest rate meaning, overall, you will be paying less back for your property. It’s worth noting that your current mortgage provider may choose to charge you an exit fee, but this is often small enough to be worth it.
3. To Reduce the Monthly Repayments
Mortgages are often our biggest monthly bills, and with other expenses, such as gas, electricity, water, council tax, etc., the monthly costs can be astronomical. That’s why remortgaging can be extremely beneficial because it reduces the amount that needs to be repaid each month, allowing you to focus on other matters, such as debt.
4. You Want to Borrow More
Life is renowned for throwing curve balls at us, and sometimes that’s related to money or not. It is, however, possible to borrow more money against your property. Properties have masses of money tied up, and remortgaging can allow some of this equity to be used. Borrowing money against your property doesn’t mean that you can receive that money for any old reason. Your mortgage lender will enquire about the usage and make a decision based on that. For example, if you wish to borrow money for home improvements, this is more likely to be accepted over purchasing a brand new car. Home improvements can also help to increase the value of your home, so remortgaging is often an investment worth considering, with a high possibility of receiving a return.
5. The Property is Valued More
Property prices have increased significantly in the past two years since COVID-19 has been around, which means many people likely bought their property for less, and it has since increased in value, putting them into a lower loan-to-value (LTV) band. In instances like this, it’s possible for homeowners to change their mortgage to get a better interest rate.
6. Debt Consolidation
One of the main reasons many people do choose to remortgage is due to outstanding debts they have, and the need to pay off these debts quickly, particularly where a larger sum of money is owed. This is where remortgaging comes in handy, allowing equity to be released. Despite remortgaging being possible for debt consolidation, it’s a big decision to consider, especially as you may not be able to find a reasonable mortgage deal. Step Change, a debt charity, provides some additional advice on remortgaging, including valuable FAQs to help those considering the remortgaging process to pay off debts.
Remortgaging Isn’t a Negative Thing
There’s a bunch of common myths and misconceptions about remortgaging, particularly that remortgaging your property sparks no benefits, but this article proves that’s not the case. What we can conclude is that your initial mortgage deal may not be suitable forever, depending on your personal circumstances, the value of your property, and more. Remortgaging can help reduce the monthly amount you owe, provide better interest rates and allow you to have more money to make your home truly yours, with renovations. Have you remortgaged your home? Let us know your advice and guidance to others in a similar position in the comment box below.
Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained remortgaging professional. Be sure to consult a remortgaging professional if you’re seeking advice about your property. We are not liable for risks or issues associated with using or acting upon the information on this site.