Types of mortgages
Remortgaging your home can be for a variety of reasons. When you remortgage you either take out a new loan with your existing lender or with another provider – paying off your old mortgage with the money you receive.
Many homeowners on an introductory low fixed or discounted variable rate may find that once that comes to an end, their interest rate and mortgage payments may well go up. This could be a good time to check out whether you can remortgage and get a lower rate elsewhere and it is advisable to start this process three months ahead of your rate coming to an end.
In this case you are generally going to be taking out a mortgage which is the same size as the one you already had. Your monthly payments may be higher or lower than you currently pay, depending on the mortgage you go for. Alternatively, you may just want the stability of a fixed rate, if you’ve been on a variable rate that you think may fluctuate.
For many, funding some home improvements can be a trigger, or there can be unexpected costs that come out of the blue, such as repairs that need doing.
If you have ‘equity’ in your home – that’s when the value of your property is higher than the amount you owe on your mortgage – you might be able to move to a larger mortgage.
Some mortgages are fee-free, but many come with legal, valuation and application/arrangement fees. You may also be faced with an early redemption charge and exit fee from your previous one if it hasn’t ended yet.
One thing that can give you a better chance of success is checking and understanding your credit report. It’s worth being prepared and aware of where you stand. Having a good credit report could mean having a higher credit score which could mean you get better deals or lower interest rates. The Experian credit report is a guide to help you understand your credit score, and how past credit management can impact on future credit applications and for you to monitor your progress as you get your finances in order before you apply.
If you are a homeowner, then you know that life can have its ups and downs. On the one hand, you have the chance to make where you live somewhere very special and personal, a place that is a delight to come home to at the end of a long day.
Raising money for necessary repairs, or more pleasant home improvements, are two reasons why some homeowners look to remortgage their properties. When you remortgage you either take out a new loan with your existing lender or with another provider – paying off your old mortgage with the money you receive.
Of course, these are not the only reasons. So why else might you want to remortgage?
If you’re currently on an introductory low fixed or discounted variable rate, for instance, then once that comes to an end, your interest rate and your mortgage payments may well go up. This could be a good time to check out whether you can remortgage and get a lower rate elsewhere.
When you remortgage to a higher mortgage in this way, it’s likely that your monthly repayments will also be higher. But if you manage to get a better interest rate than you were on, this could mean the increase is not so large. You might even want to remortgage to buy a second property as a buy-to-let. But you have to have quite a large amount of equity in your home to be able to do this.
You can also remortgage to get a more appropriate mortgage if your personal circumstances have changed. For example, if you get promoted at work and are earning a new salary, you may want a new mortgage, which allows you to pay it off early with no penalties.
So remortgaging can help you reduce your monthly payments, give you money for home improvements or other purchases, free you up to make overpayments or indeed increase your monthly payments by rearranging your mortgage over a shorter term.
You also need to be aware of the associated costs. There may be some fee-free remortgaging deals out there, but if not, you’ll be faced with legal, valuation and application/arrangement fees. You may also be faced with an early redemption charge and exit fee. It’s essential you get your ‘mortgage calculator’ out and work out whether switching is financially the right thing for you to do.
Once you’ve chosen a mortgage, you’ll need to make the application to the lender –When you get the formal offer, you then need to hire a solicitor to handle the legal aspects of remortgaging, including arranging the transfer of funds – again, just like your first time.