The Benefit of Remortgaging and How It Can Save You Money
Remortgaging is the process of moving your mortgage from one lender to another. It can have a range of benefits for homeowners, including saving money on your monthly mortgage payments, releasing equity in your home, and consolidating debts. In this blog post, we’ll explore the benefit of remortgaging and how it can save you money.
Benefits of remortgaging
Save money on your monthly mortgage payments
One of the biggest benefit of remortgaging is the potential to save money on your monthly mortgage payments. This can be achieved by finding a better interest rate with a new lender or negotiating a better deal with your existing lender. Even a small reduction in interest rates can add up to significant savings over the life of your mortgage. However, it’s important to weigh the savings against any fees or charges associated with remortgaging to ensure that you’re actually saving money in the long run.
Release equity in your home
Another advantage and benefit of remortgaging is the ability to release equity in your home. If your home has increased in value since you bought it, you may have built up equity in your property that you can use for other financial needs. This can be done by taking out a larger mortgage than your current one, using the additional funds to pay for home improvements, pay off debts, or other financial needs. However, keep in mind that borrowing more money means increasing your monthly repayments, so it’s important to consider whether you can afford the new payment before you take on more debt.
Consolidate debts
Remortgaging can also be a good option if you have multiple debts with different lenders. Consolidating your debts by remortgaging can simplify your finances by combining all your debts into one loan with a single monthly repayment. This can also help lower your overall monthly repayments as the interest rate on a mortgage is typically lower than that of a credit card or personal loan. However, it’s important to consider the long-term implications of consolidating debt, as it can extend the term of your loan and increase the amount of interest you pay overall.
Switch to a better mortgage product
Remortgaging can be an opportunity to switch to a better mortgage product that better suits your needs. For example, if you have a variable rate mortgage, you may want to switch to a fixed-rate mortgage to protect yourself against potential interest rate increases. Alternatively, you may want to switch to an interest-only mortgage, which allows you to pay only the interest on the loan, freeing up more cash each month. A financial advisor can help you determine the best mortgage product for your individual circumstances.
Avoid paying your lender’s standard variable rate
When your initial mortgage deal ends, you will usually be moved onto your lender’s standard variable rate (SVR), which is typically higher than the rate you were previously paying. Another benefit of Remortgaging can help you avoid paying your lender’s SVR and can save you money on your monthly repayments. However, it’s important to factor in any early repayment charges or exit fees that your current lender may charge if you choose to remortgage.
How to remortgage
If you’re considering remortgaging, here are the steps you’ll need to take:
Research your options
Before remortgaging, it’s important to research your options and understand the different deals available. Working with a mortgage broker can be a great way to access the best deals on the market, as they have access to a wide range of lenders and can help you find a deal that’s tailored to your specific needs. They can also provide expert advice on factors such as interest rates, fees, and loan terms to help you make an informed decision.
Compare interest rates
When comparing interest rates, it’s important to look beyond just the headline rate. Some mortgages come with additional fees or charges that can impact the overall cost of the mortgage. For example, some lenders charge arrangement fees or valuation fees, while others offer incentives such as cashback or free legal work. Make sure you take all of these factors into account when comparing deals.
Apply for a new mortgage
Once you’ve found the right deal for you, it’s time to apply for a new mortgage. You’ll need to provide documentation such as proof of income, proof of identity, and details of your current mortgage. Your new lender will then carry out a credit check and assess your application to ensure you meet their lending criteria.
Valuation and legal work
Before finalising your remortgage, your new lender will need to carry out a valuation of your property. This will help them determine how much your property is worth and ensure that it is suitable security for the mortgage. They may also carry out legal work to transfer the mortgage from your old lender to the new lender.
Switch your mortgage
Once the valuation and legal work are complete, your new lender will pay off your existing mortgage and transfer your mortgage to them. This can take a few weeks to complete, but once it’s done, you’ll be on your new mortgage deal.
Is remortgaging right for you?
Remortgaging isn’t right for everyone, and it’s important to carefully consider your individual financial situation before deciding whether or not to remortgage. Here are some factors to consider:
- How much equity do you have in your home?
- What is your current interest rate?
- How much will you save by remortgaging?
- What are the fees associated with remortgaging?
If you’re not sure whether or not to remortgage, it’s a good idea to speak to a financial advisor who can help you determine the best course of action based on your individual circumstances.
Final Thoughts
Remortgaging can be a great way to save money on your monthly mortgage payments, release equity in your home, or consolidate debts. However, it’s important to carefully consider your individual financial situation before deciding if remortgaging is right for you.
At Aspire Financial Advisors, we can help you understand your options and determine if remortgaging is the best course of action for you. Our team of experienced advisors can guide you through the remortgaging process, and help you find the best deal for your needs.
Whether you’re looking to save money on your monthly repayments, release equity in your home, or consolidate debts, we can help you make an informed decision that will benefit you in the long run.
Don’t hesitate to contact us to learn more about how we can help you with your re-mortgaging needs.
| Approver Quilter Financial Services Limited & Quilter Mortgage Planning Limited. 14th November 2023 |