Remortgaging has long been a popular option for homeowners looking to free up cash, improve the flexibility of their mortgages, or simply because their current mortgage is coming to an end. When the average good mortgage deal lasts maybe 2-5 years, this can be a surprisingly common reason. There are, in fact, plenty of good reasons to remortgage, many of which will offer you the chance to increase financial freedom.
In the UK, for example, around a third of all home loans are remortgages. However, it’s also a complex process at times. For example, if you breached the initial mortgage you were paying, there would be a possibility of an early repayment charge. Despite that problem, your savings from the remortgage’s new rate could then balance out any repayment charges. As you can see, it can get more taxing (if you’ll pardon the pun) on your time to do. Let’s take a look at some of the key reasons you might choose to remortgage and the common things to look out for if you do.
The bottom line
It’s an obvious one, but reducing your monthly mortgage bill is a clear and popular reason. In the majority of households, your mortgage payments will be your biggest monthly bill to pay and so the opportunity to reduce that down certainly won’t do your bank account any harm. Despite that, many people don’t opt to shop around and may decide the easiest, or seemingly the easiest, the decision is to simply re-negotiate the rate you’re paying with your existing lender.
There are some fantastically helpful, free mortgage broker platforms like Trussle available that allow quick and comprehensive comparisons of deals. You could save quite a bit more than trying to outmaneuver an existing lender in a meeting. What’s more, the availability of choice alone, and ability to try and have your original lender match a certain rate, can be a great bargaining chip, too.
When the going gets good
The changeable real estate market can actually have a big impact on mortgage-holding individuals. As mortgage deals can be over a number of years, the price of the property will likely change in that time and, sometimes, in your favor. When your house becomes more valuable than the mortgage deal you’re in, you’re in what’s known as a lower loan-to-value (LTV) band. Remortgaging opens up the possibility for lower rates and, here’s the good bit, increased disposable income for you. Again, helpful educational sites are great at helping to explain these concepts, and when they might be relevant to you.
Overpay to own
Wanting to pay more on a mortgage can actually make a lot of sense, especially if you’ve recently found new, higher income and want to speed up the mortgaging process. Equally, some people choose to take ‘holidays’ from mortgage payments, in the occurrence of a sabbatical from their full-time job. A major obstacle to paying more is the issue of ‘mortgage overpayment’ penalties.
Fundamentally, the act of remortgaging can mean being able to find a deal that doesn’t penalize overpayments or payment holidays, alongside other benefits like lower rates. But it comes down to preference and choice, both of which should be up to you. Of all the reasons to remortgage, or at least get to grips with the concept; it’s about finding a deal that fits your needs, prospects, and ambitions, not your lenders’.
