Why You May Want to Remortgage Your Home

Remortgaging your home involves switching your current mortgage to a new deal. This can be arranged with either your existing lender, or a new lender. In order to take advantage of new deals on offer, many borrowers wish to switch their mortgage every few years, ensuring that they do not miss out on potential benefits including the opportunity to reduce the total amount to be paid back. In some cases this can be a significant saving.

There are four main reasons why borrowers seek to remortgage: the end of a fixed-rate deal; a change in circumstances; home improvements, and looking to raise cash.

Increases in interest rates mean that borrowers coming off fixed-rate mortgage deals are facing higher repayments than they were expecting, when the mortgage reverts to the lender’s Standard Variable Rate (SVR). For this reason, borrowers may consider switching their mortgage to another lender who can offer better rates, allowing them to save money on mortgage repayments, or even to repay the loan sooner.

During the fixed rate period an early repayment charge (ERC) will stand and it is advisable to check when this ceases to apply. However, even with the cost of the ERC, borrowers are still often able to save a substantial amount by switching mortgages.

Changes in circumstance can happen at any time in a person’s life and can be positive or negative. A promotion, an inheritance or even a lottery win can mean a borrower is suddenly in a position to repay more of their mortgage. Many mortgage deals allow a penalty-free overpayment each year, however once again it is important to check that you do not face early repayment charges.
Many people find themselves unable to meet their mortgage repayments for numerous reasons. A borrower has the option to extend the term of the mortgage, paying more in the long run but cutting down monthly repayments that are affordable.

Remortgaging can also be a way of raising cash, perhaps towards a wedding, a dream holiday or starting a business. Raising money in this way has certain implications, for example the borrower needs to be sure they can continue to pay their repayments for a number of years.

House prices have risen dramatically in recent years and many borrowers are keen to use any increased value of their home to release equity. This allows the borrower to consolidate any debts which may have higher interest rates than that of their mortgage.

Remortgaging for home improvement purposes is an ideal way to borrow in order to invest in your home, usually a person’s biggest asset. Adding an extension, conservatory or an improved kitchen or bathroom will add value to your home as well as giving the owner extra space. This can also eliminate the need to move and be cheaper and more convenient to do.

Remortgaging can be an ideal solution for many borrowers, however it is vital to think carefully before doing so, as any home is in danger of being repossessed if mortgage repayments are not met.

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