Remortgaging is when you apply for a new mortgage with a different lender but stay in your current home. Normally, remortgaging allows you to change to a lower mortgage interest rate (depending on the economic climate). However if you leave your current mortgage deal early, there may be early repayment charges that apply. But don’t worry, we’re here to help. We’ll go through what a remortgage is, reasons to remortgage, and the pros and cons of remortgaging.
What is a remortgage?
A remortgage is when you change your current mortgage deal. You can either move your current mortgage deal to a new lender, or swap to a different deal with your current lender. The latter is known as a product transfer and will incur less fees than moving to a new lender. But you might be asking: what happens if you remortgage to a new lender? Put simply, the new lender pays the mortgage off from your old lender, and then your monthly mortgage repayments will be paid to the new lender, at a different rate and amount than you were paying previously.
When going through the remortgage process, it’s pretty similar to the mortgage process. You’ll need to provide bank statements, expenditures, and three months’ worth of payslips, or 2 years worth of financial accounts if you’re self-employed, so that the lender can conduct an affordability assessment.
So now you know what a remortgage is, it’s time to find out why people remortgage.
Reasons to remortgage
There are many reasons why people remortgage but here are a few below:
- Moving to a better rate.
- You want to borrow more.
- Your home has more equity.
- Your current deal is ending.
For more information on these reasons, check out our article should I remortgage?
When deciding whether or not to remortgage, make sure you do your research. You want to make sure you choose the deal that’s right for your circumstances. Using a mortgage adviser could help; they can scour the market to find the right deal for you.
The pros of remortgaging
Like everything, there are benefits and downsides to remortgaging but going through the remortgage process can be beneficial. If you remortgage to a lower rate, you could save yourself money on your monthly repayments. You can also remortgage to release equity which can be used to renovate your home, pay off any existing debts, or even gift as a deposit to a family member for their own home. Whatever the reason, make sure you know the fees involved before you make any final decisions.
The cons of remortgaging
Whilst remortgaging can help free up some of the cash in your home, there are fees that you’ll have to pay these should be factored into the total cost. Should you remortgage to a new lender, you may have to pay an exit fee with your current lender. Not only this, but you’ll have to pay admin fees, legal fees, and any adviser charges, there may also be early repayment charges that are applicable if you leave your current mortgage deal before it is due, so it’s best to run through the numbers beforehand because it might end up causing you more money in the long run. Our advisers will always make you aware of any charges and fees that may apply and ensure it is right for you.
So now you know what to expect when it comes to remortgaging. If you have any questions, please get in touch. Our mortgage advisers can take some of the paperwork off you and help streamline your remortgage process.
Consolidating debt may reduce your outgoings now, but you may end up paying more overall. Your home may be repossessed if you do not keep up repayments on your mortgage
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