Revisiting Your UK Mortgage through Remortgaging
How many verbs have the prefix “re” attached to them? The number is seemingly unlimited. When we “review” something, we look at it again. When we “reuse” something, we use it again. When we “recollect” something, we sort of collect it again for recall. In the world of mortgages, one of our options is to secure a remortgage.
The remortgage
What is a remortgage? It is not applying for a mortgage for which a lender already rejected you. Neither is it the act of taking out the same mortgage twice. Remortgaging involves switching your current mortgage, to a different lender. The goal is to reduce how much you are paying on your mortgage.
You might be surprised to learn that you are not required to stay with your initial mortgage lender, for the duration of the mortgage term. At any time, you can switch mortgage lenders, to obtain a lower interest rate!
In fact, you can even secure a remortgage from your current lender. However, remember that, “a bird in the hand is worth two in the bush.” Do not leave your current lender without being 100% certain that you can get a better deal from another lender. Also, verify that your lender will not charge you an early redemption penalty for switching to a new lender. This can cost you several thousand pounds, which could easily offset any savings from switching to a different lender.
Furthermore, you must consider remortgaging costs and fees such as the setup/arrangement/reservation fee, valuation costs, and solicitor’s costs.
Pound for pound
How can you determine if the possible savings from remortgaging your home are worthwhile? As you might guess, a key is to find a lower interest rate than you are paying now. You can inquire about this information directly with your lenders of choice, or through a mortgage broker. Make sure that you factor all of the remortgaging fees that a lender would charge you. Furthermore, consider the terms and conditions of a new mortgage.
Besides looking for a better interest rate, you might also be interested in securing remortgage information, in order to free up some cash if you home’s value has risen drastically since you initially took out the mortgage.
You can determine how you want to spend the cash. Perhaps you want to pay off your credit card bill or other debts. Maybe your roof is about to cave in or you have some chairs that are literally on their last legs. Or perhaps you simply want to pamper yourself with a holiday to a tropical paradise.
Regardless of what you want the extra cash for, if you have made your repayments in full and your financial status has remained virtually unchanged, receiving a bigger loan should not be problematic at all. In fact, there is more good news! A lender may also offer you a lower interest rate than you are currently paying.
Too good to be true?
With all of those perks linked to remortgaging, why do many people choose not to remortgage their homes? The bottom line is that many homeowners simply do not realize how much money they could save. Others assume that the opportunity cost is not worth the time and effort they would have to spend.
Perhaps some of this resistance is justified, as taking out a loan in the past was quite challenging. However, the process has become much easier in recent times, so that is one less objective you should have for remortgaging your property.
Remortgage research
So how do you find the best remortgaging deal? The competition has become fierce among lenders, making it easier to find a good remortgaging deal. For instance, do this experiment. Supply your financial details to an IFA or mortgage broker. Your jaw will drop at how soon they promise you a better remortgaging deal!
To find the best remortgaging deal in the UK, you will have to shop, shop, shop. The best way to get started is to submit your basic financial details to an independent mortgage website. A mortgage broker will then send you an offer in a jiffy.
Of course, your goal is to find mortgages with the lowest interest rates. You should review the various types of interest rates deals available. However, you should also examine any remortgaging offers, with a fine-toothed comb. They might include a tie-in. After drawing you in with discounted interest rates, the lenders include a tie-in that requires you to pay a penalty if you switch lenders before the mortgage’s term ends. After switching to a new lender to save money, you could actually end up paying more. The bottom line is that the best remortgaging deal might not have the lowest interest rate in the market, but will lack a tie-in.
Also, should you increase your mortgage term’s length, through remortgaging? In short, it is not advisable. It is wiser to take out the loan for the same term as your first mortgage. Ideally, you should actually reduce the loan’s term, to enjoy more overall savings.
The good news about bad credit
If your credit is far from perfect, you can still consider remortgaging with a poor credit record. You have two options:
- Borrow against the equity in your home in order to earn some cash or to pay off other debts that you have.
- Remortgage to lower your monthly payments. Typically, this involves lengthening your mortgage’s term.
Both cases should help to provide you with more convenient monthly repayments. This will help to control your personal finances better. .
What are the benefits of bad credit remortgages? Generally, two exist. The first is that you will have lowered monthly payments, though they will be over a longer term. Secondly, you will have the opportunity to consolidate your other debts into a single loan with lower interest and repayments that are more convenient; or to free up some of your home’s equity, as cash.
Another benefit of remortgaging your home is that your credit rating will improve as well. This happens as you pay off your other debts and handle your mortgage repayments. Nevertheless, keep in mind that while your bad credit remortgage interest rate will be lower; your overall interest payments could be higher. That is due to the lengthier term of your loan.
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