Low interest rates and the increase in the range of mortgage products over the past few years due to increased competition have meant that there has never been a better time to review your existing mortgage arrangements, even if you have a poor credit history caused by previous unpaid debts or late payments.
To put it simply, there is a good chance you could save money by remortgaging.
What is a remortgage?
Remortgaging means switching to a different mortgage deal. This could be with your existing mortgage lender, but more often than not it will be with a different bank or building society. If you have credit problems, or have been turned down by a mainstream mortgage lender, then a specialist adverse credit mortgage lender may be the answer.
In the past, many people never bothered to remortgage, but it looks like that situation is finally changing. According to the Council of Mortgage Lenders, in January 2003 (for the first time ever) remortgages accounted for more than 50% of the total monies advanced by mortgage lenders
Remortages are also known as refinancing and in other words it's when you pay off one mortgage with the proceeds that you get from a new mortgage using as security the same property. Remortgages are not a second mortgage on the property, not switching from one product to another with the same lender; remortgages don't involve the removal of one legal charge over a property and its substitution with another in favor of a new lender.
Choosing from different types of remortgages is a big financial decision and bear in mind if you fail to repay your mortgage repayments then you could lose your home, that's why you have to weight up the costs in detail. It's advisable to discuss with an independent financial advisor and not to rush into anything. But if you are careful in your assessment of the benefits of remortgages then there is no reason why you can't save a lot of money. Remortgaging can be a fantastic way of consolidating your outgoings, including any other debts, releasing funds for increased expenditure on your home, or just simply saving you money to save or enabling you to pay off your mortgage earlier than with your current deal.
Reasons for remortgaging:
Homeowners may choose remortgages for various reasons:
- to reduce the size of repayments
- to pay off a mortgage earlier
- to raise capital
- to consolidate other debts
- to get a better rate
- to release equity
- to move house easier
- to fund the likes of home improvements or holidays
Remortgages can save a lot of money, they are the financial equivalent of liposuction, but you have to bear in mind that they don't suit for all people and all situations, especially in the current economic climate with slowing house prices and higher interest rates and mortgage crisis, remortgages should really be driven by need rather than luxury.
How to remortgage?
Applying for remortgages is very easy process. You have to look at your current situation and see how much cash you could save by switching your mortgage lender. When you are ready to remortgage, follow the plan:
- Check out your current deal
- Check out some new deals
- What rate of interest different remortgages carry
- Compare the monthly costs
- Are there any early redemption charges (ERCs) or exit penalties
- Does the mortgage carry any arrangement fees
- How long will the whole remortgage process take
- Can I remortgage more than once
- Compare different types of remortgages
- Fixed Rate Remortgages
- Discounted Rate Remortgages
- Capped Rate Remortgages
- Flexible Remortgages
- Tracker Remortgages
- Bad Credit Remortgages
- Shared Appreciation Remortgages
- Equity Release Remortgages
- Do your sums and make decision based your analyses
Advantages and disadvantages of remortgages:
Advantages:
- a good way to enter the buy-to-let market
- the sensible way to consolidate credit card and personal loan debts
- you can borrow more cash
- you can switch to a cheaper interest rate and lower monthly repayment amount
- you can borrow extra money to improve your home
Disadvantages:
- The interest charges are likely to be greater
- You may incur Early Repayment Charges (ERC's) and other costs
- Your home is at risk if you fail to keep up your repayments
If you have any questions, fill the requirement form and get free advice from specialists.
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