Everything You Need to Know About Remortgaging Your Home
A third of all home loans in the UK are remortgages, and refinancing your property can be a handy way to reduce monthly mortgage payments, save money in the long run and even access more equity. But how do you know when it’s the right time to remortgage your home and how you should approach it?
If you just so happen to find yourself asking these questions about your remortgage, you’ve come to the right place. We’ve put this guide together, detailing everything you need to know about remortgaging, from covering the terminology involved to what you can expect from the process. So read on and become a remortgage expert before deciding whether or not it’s the right move for you.
Remortgaging to lower your mortgage payments
Most people remortgage to reduce their monthly mortgage payments and save money in the long term. One way of doing this involves finding a lower interest rate, which is the amount you pay on top of the initial borrowing.
Reducing your loan to value (LTV) is another option for lowering the amount you pay each month. The LTV is the size of your mortgage compared to the value of your property, with rates based on LTV bands of five per cent.
You could potentially overpay on your current mortgage, so the rate drops into the lower LTV band, which would provide access to better deals with lower monthly repayments. A small decrease to your monthly repayments can add up over a two-year fixed deal, which is why it’s definitely something you should consider.
Read our full guide: “How LTV (loan to value) affects your remortgage?”
Remortgaging to increase equity
If you’re looking to raise capital, then remortgaging can help you find the extra that you need – especially if the value of your property has increased since you purchased it. Many people remortgage to pay off small debts, raise funds for another house purchase or to renovate their home.
While these are the primary reasons people remortgage their homes, other factors might come into play, such as:
– Your current deal is about to end – most initial mortgage rates are fixed for between two and five years, and remortgaging may be a necessity to stop you from going onto a higher rate after the initial period ends.
– Your lender won’t let you overpay – mortgage lenders have their own requirements when it comes to paying back the money you borrowed. Perhaps you want to overpay on your mortgage but the lender won’t let you, and therefore would like to remortgage to one who is happy to allow overpayments.
– You’re after more flexibility – some mortgages can be flexible, allowing you to take payment holidays (although most lenders now offer this amid the Covid pandemic) and combine your savings or current accounts with your mortgage.
– You’d like to pay off your Help to Buy loan – most people find that it’s cheaper to remortgage and pay off their Help to Buy Loan after the initial five-year interest-free period.
When shouldn’t you remortgage?
Remortgaging is often an appealing option, but there are times when doing so might not be all it’s cracked up to be. Before going through the process, many homeowners should ask themselves if remortgaging is a good move. Here are some signs to look out for that will help you make a decision…
Remortgaging might not be ideal when you have high repayment charges
There isn’t much point remortgaging if you’re in the middle of a fixed deal which has repayment charges. You could be forced to pay as much as five per cent of the loan when switching from one lender to another in the middle of the fixed rate. Doing so can even cost you tens and thousands of pounds.
Remortgaging might not be ideal when you only have a small amount to pay off your loan
If there’s less than £25,000 on your loan, not only will it probably make more sense to keep paying your current mortgage, but most lenders won’t lend with such a low amount left. The smaller the mortgage, the higher the remortgaging fees.
Should you remortgage to pay off debts?
Remortgaging can be an effective way of paying off debts. But you should look at the whole picture before deciding. Sometimes refinancing the debt can be a more cost-efficient way than loading it onto an already-long term debt in the form of your mortgage.
Now that you know more about remortgaging and what it entails, why not speak to one of your advisors? Using an Emoov broker to remortgage your deal is completely free, and we have access to more than 90 lenders who offer lots of remortgage deals.