What are the benefits of remortgaging?

You don’t have to keep the same mortgage throughout the entire period of the loan. In fact, sticking with it could result in additional costs amounting to thousands of pounds over the repayment period. This brief guide aims to offer detailed insights into the process of remortgaging, shedding light on potential benefits you might gain from exploring this option.

What is remortgaging?

Remortgaging is when homeowners change their mortgage deal or need to take a larger loan to release more money from the equity of their home.

Many mortgages come with a fixed or introductory low rate that ends after a few years. Opting for a different mortgage deal after this initial period is crucial for managing and minimising mortgage expenses.

Alternatively, homeowners might choose to release more equity from their homes, seeking a larger sum than the original mortgage amount.

Who should consider remortgaging their home?

Remortgaging is an option for homeowners who have completed the introductory period on their current mortgage deal and have transitioned to their provider’s standard variable rate.

Additionally, it proves to be a good option for those looking to enhance their property’s resale value through improvements such as a new kitchen or bathroom, or an extension. For instance, undertaking an extension or loft conversion can add up to 20% on the sale price of a property. So, it may make financial sense to remortgage to cover the cost of the work.

Now you know the ‘what’ and the ‘who’ of remortgaging, let’s look at four benefits that explain the ‘why’.

Reduce your mortgage costs

Once your introductory rate is over, you will be subject to a higher interest rate on your mortgage. This can potentially result in adding thousands of pounds in interest over the loan’s duration.

Adapt to life events

The existing terms of your mortgage deal may not offer the flexibility you now need. For instance, if your income has experienced a decrease or increase since your original deal, you may want to change your monthly repayments or loan term.

Free up your capital

Lower payments, thanks to more favourable interest rates on a new deal, mean you’ll have more disposable capital from your monthly income. Accessing additional equity through a larger loan amount also allows you to release cash for significant expenses like home improvements.

Pay off your mortgage sooner

In the event of a financial windfall, like an inheritance, you may have the opportunity to make an overpayment or fully pay off your mortgage.

Opting for remortgaging could potentially result in substantial savings by avoiding early repayment charges and exit fees. Paying it off in less time will also save you on the interest charged over time.

Wait, before you remortgage…

You should know that remortgaging can take up to three months to complete once you’ve decided to go for it.
Like the impact on your credit rating during the initial mortgage application, applying for a new mortgage deal can also affect your credit score. You may also be rejected for a new deal if your circumstances have changed, such as a lower household income than you’ve had before.

It’s important to note that switching mortgage deals comes with associated fees and charges, which could potentially counterbalance any savings gained from securing a more favourable interest rate.

Before you decide to remortgage your home, speak to an advisor to make sure it’s the right option for your personal financial circumstances and needs. Contact our team today to explore your options, simply call 01634 96811 or book your appointment online.