Remortgage
Remortgages make up approximately 80% of the mortgage market and mortgage lenders compete fiercely for the business with many offering preferential rates to attract remortgage customers.
What is a Remortgage?
A remortgage (also known as 'refinancing') is when you take out a new mortgage on your property with a new lender, even though you are not moving home. Your previous lender is paid off with funds from your new mortgage.
The main reason to remortgage is to get a better interest rate. By cutting 1% off a £100,000 mortgage will cut your costs by around £80 a month and remortgaging is the biggest single money-saving activity possible so it is wise to shop around for the best deal to suit your needs.
Your initial mortgage deal once over will most likely revert to a standard variable rate which is usually very uncompetitive. You may even want to change your mortgage product before your current one expires such as if interest rates plummet. Bear in mind that remortgaging isn't free so you must ensure that any savings you make from the new mortgage product at least covers the fees involved.
You may also have to remortgage if you're looking to move house. Most mortgage lenders, in theory, will allow you to transfer your home loan to the new property (subject to a valuation), however, if you are not able to do this, you will need to remortgage to a new product.
If you are staying with your existing lender, then remortgaging should be relatively straightforward and your lender will most likely contact you before your mortgage term expires to talk through your options. If not, you can always get in touch with them yourself. Don't feel like you have to stay with them as there are a wide range of lenders out there who may have a more suitable mortgage for you and at a better price.
Advantages of a Remortgage
- Remortgaging can save you huge sums of money if you switch to a lower interest rate
- Remortgages make up the majority of the mortgage market and so the interest rates offered are the most competitive
- As you have already bought the property and have a track record of your mortgage repayments, the application process is generally a lot shorter and smoother
Disadvantages of a Remortgage
- A remortgage is not free and there will be fees applicable. There will be an arrangement fee and possibly another valuation fee
- You may incur an Early Redemption Charge from your current lender which can be quite significant. This depends on the mortgage product you have and how long you have had it. You will need to check your mortgage offer to see if an early repayment charge applies
Advice when remortgaging
- Check the conditions of your current mortgage as there may be and Early Redemption Charge payable
- Be aware that there are fees involved with remortgaging to another lender. You must ensure that any savings in your interest rate will cover the cost of these fees in order to make remortgaging worthwhile
Summary
- Remortgages make up about 80% of the mortgage market and remortgage business is fiercely contested
- A remortgage is when you take a new mortgage on your property with a new lender and pay off your previous lender
- Remortgaging can save you huge sums of money
- Check the conditions of your current mortgage as there may be and Early Redemption Charge payable
For more information about 'Remortgages', you can call us on 020 8783 1337 or submit an online quote.
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