For the majority of people, their home loan is their greatest financial responsibility. What’s more, streamlining the biggest debt can create a huge saving. When you choose to remortgage you are shifting from one home loan offer onto the next and will be paying off your old home loan with the new one, utilizing your property as security.
Whether you are moving mortgage providers or staying with the same bank and getting a new deal, it’s still categorized as remortgaging. There are numerous reasons people decide to remortgage – some of these include:
To Raise Cash
If your salary has grown since taking out your home loan, then you will usually have the option to take out a bigger mortgage than before. You can then utilize this opportunity to raise money, which can be used to redecorate, buy a car or fund another major purchase.
On the off chance that you have a few debts and are attempting to pay them off, you can remortgage your property to help clear those debts. Mortgage financing costs are, for the most part, far less expensive than credit cards or personal loans. By remortgaging you can reduce the interest payments on any existing debts you may have. You can use an online calculator for mortgage repayments to compare interest rates with personal loan rates.
If the estimation of your home has risen then you may have the option to get some of its value released to spend on something else. This could be another major purchase, such as a holiday, or to reinvest in a buy to let property or a business.
Remortgaging can be advantageous for many reasons, but it’s not always the right thing to do. Like any lending, a remortgage comes with a set of risks which should be taken into consideration.
Cost of Switching
If you decide that you’d like to go with a new lender for your mortgage, there’s a chance that you’ll have to pay certain fees to your existing lender. This is usually an early repayment fee, the cost of which will vary from place to place.
There may also be set up fees involved when you transfer to the new lender. Ideally the new rate you’re being offered should more than cover these expenses, but it’s something to be aware of if you decide to change. It’s also worth checking with your current lender to see if they’re willing to match the deal you’re being offered elsewhere. They may be keen to retain your business, so it doesn’t hurt to ask.
Change in Circumstances
When you consider the average repayment term for a mortgage, it’s normal for people to experience a change in their financial circumstances. This can be positive, such as an increase in salary, or negative, such as losing employment or poor money management.
The potential for a change in circumstances is something which should always be considered before committing to a long term financial arrangement like a mortgage. Is your job secure? Are you likely to command the same salary if you move elsewhere? Do you expect to be earning significantly more money in the near future? All these questions should be asked before you commit to a new mortgage.