A remortgage involves switching your existing mortgage to a new lender or deal without moving home. This can be done to secure better interest rates, reduce monthly payments, release equity, or switch to a different type of mortgage. Remortgaging can help manage finances more effectively and take advantage of favourable market conditions.
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Remortgaging offers several advantages for homeowners looking to improve their financial situation.
Here are some key benefits to consider:
Lower Interest Rates
By remortgaging, you can take advantage of lower interest rates available in the market. If mortgage rates have decreased since you obtained your original mortgage, switching to a new mortgage with a lower rate can result in significant savings over the long term. Consider seeking advice when it comes to reevaluating the higher-rate SVR following the initial rate period, as it can be a valuable decision.
Access to Additional Funds
Remortgaging allows you to tap into the equity built up in your property. If your home’s value has increased, you can release some of the equity through a remortgage. This extra cash can be used for home improvements, debt consolidation, or other financial goals.
- While remortgaging offers benefits, it's important to consider the following factors before making a decision:
Costs
Remortgaging comes with associated costs, such as arrangement fees, valuation fees, legal fees, and potentially exit fees from your current mortgage. It’s essential to weigh these costs against the potential savings or benefits you may gain from remortgaging.
Eligibility Criteria
Lenders assess your financial situation, creditworthiness, and loan-to-value ratio when considering your remortgage application. Changes in your circumstances, such as decreased income or credit issues, can impact your eligibility for remortgage deals.
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Timing plays a crucial role when considering a remortgage.
Two key timing factors to keep in mind are:
Fixed-Rate Mortgage Expiry
If you’re on a fixed-rate mortgage and the fixed term is about to end, you may be automatically transferred to your lender’s standard variable rate (SVR), which is often higher. It’s wise to start exploring remortgage options before your fixed term expires to secure a better rate.
Market Conditions
Keeping an eye on market conditions can help you make an informed decision. If interest rates are predicted to rise, it might be beneficial to remortgage sooner rather than later to lock in a lower rate.