A remortgage can be used for the purpose of gaining lower interest rates on your mortgage or raising finance through releasing equity.
The term “Remortgage” is used to explain the process of moving your mortgage to a new lender. A different lender may offer a significantly better deal than your existing lender.
A remortgage means you are ending your current mortgage scheme and switching to a new scheme. A remortgage generally involves changing mortgage lenders because most lenders do not generally offer remortgage schemes to existing customers.
Mortgage lenders offer discounted interest rates and other desirable introductory offers to attract mortgage holders to switch to their particular lending institution.
Review your current mortgage. If you feel you are paying excessive rates of interest, compared to other lenders then a remortgage may save on your monthly payments. Alternatively, you may be looking for a way to finance an extension or purchase a new car, you could seek to increase your mortgage and take the extra sum as cash.
Releasing equity is a good way of raising additional finance. If your home has positive equity - its market value is greater than the outstanding mortgage - you can increase the size of your mortgage.
One of the most common reasons for remortgaging is to reduce costs. By switching to a lower interest rate you can either benefit from lower monthly repayments, or keep the monthly repayments the same, thus repaying the loan quicker and reducing the overall term of the mortgage.
A remortgage should be considered for a variety of reasons:
By switching to a mortgage deal with lower interest rates you could save a considerable amount over the term of your mortgage.
A remortgage can allow home owners to consolidate their existing debt into one manageable monthly payment. Debt consolidation makes life easier in the short term and makes savings in the long term.
If your home has increased in value since you took out your mortgage it may be worth considering releasing some of the tied up equity. Equity release can be one the cheapest forms of borrowing.
The remortgage process is relatively simple, and the process from start to finish normally lasts between 4-6 weeks.
In terms of costs there is no stamp duty to be paid, as you are not purchasing a property. Many lenders will pay some or all of your valuation and legal fees. In some cases there may be an arrangement fee or booking fee from the new lender.
There may also be redemption penalties on your existing mortgage and you will need to take these into account when assessing how much money you could save by remortgaging.
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About the Author: John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the www.directonlineloans.co.uk website.