Remortgaging Explained

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With changes in mortgage rates, many homeowners look for ways to get better deals on their current mortgage. Remortgaging is a way to transfer your mortgage from one lender to another and take advantage of lower interest rates that lenders may offer.

There may be conditions and extra costs attached with the remortgage and not all lenders will take on existing mortgages.

This guide to remortgaging looks at what is involved in switching mortgage lenders. It also examines the various reasons why many homeowners may choose to remortgage their home.

What is remortgaging?

Remortgaging is not the same as taking out a second mortgage on your home. Remortgaging describes the legal transfer of the existing mortgage to a new lender.

Most homeowners decide to remortgage their home to take advantage of better deals and lower interest rates offered by other lenders.

Why would you choose to remortgage?

There are many reasons why remortgaging may be an appropriate course of action in some circumstances. For example:

•    It may be possible for a borrower to find a cheaper mortgage and reduce monthly repayments
•    Remortgaging may allow a borrower to extend the mortgage term and thus reduce monthly costs
•    It may allow a borrower to pay off their mortgage earlier by keeping the same monthly repayments but paying less interest
•    Remortgaging may allow a borrower to release the value from their property

Homeowners may choose to look for a better deal when their current fixed term or discounted mortgage rate is coming to an end.

Steps to remortgaging a home

Not all homeowners benefit from remortgaging their home. As with all property deals and borrowing transactions, fees may be associated with the remortgage. Also, depending on the amount of deposit you made on your original mortgage, you may not have enough equity to apply for a remortgage.

However, there are some steps you can take to start thinking about whether remortgaging may be in your interests.

Checking all costs and fees on your existing mortgage

You may wish to know if remortgaging your home will benefit you financially in the long run. Many discounted, fixed-term, and capped mortgage deals have an early redemption charge (ERC). This could penalise you financially if you swap lenders too early. There are also costs associated with releasing the deeds and covering Land Registry costs.

Checking arrangement fees

When it comes to deciding on your new mortgage lender, the interest rate on offer may be combined with arrangement fees. Depending on the amount you are borrowing and your individual circumstances, it can be advantageous to pay a slightly higher interest rate in return for lower set up fees. You’ll need to seek financial advice before committing to any course of action. For example, some attractive mortgage deals with low-interest rates come with very high arrangement fees and high redemption charges.

Many homeowners get advice from professional mortgage advisors to work out whether remortgaging their home is a suitable option for them.

The information contained within was correct at the time of publication but is subject to change.
Date: 08/07/2017

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