What is Remortgaging?
Put simply, remortgaging is replacing your current mortgage with a new one. This could be through a different lender (known as an external remortgage) or a new deal with your current lender (known as an internal remortgage). Many homeowners consider remortgaging when their fixed-rate mortgage term is ending—usually after two or five years.
It can be a smart financial move for several reasons, such as securing a better interest rate. However, like any major financial decision, it requires careful thought.
Common Reasons for Remortgaging
Homeowners may choose to remortgage for several reasons:
- To Get a Better Interest Rate: When your fixed rate ends, you’re usually moved to your lender’s standard variable rate (SVR), which is often higher. Remortgaging can help you avoid this by securing a better deal.
- To Release Money: If your property has increased in value, you may be able to borrow more money. This can be useful for home improvements, consolidating debts, or funding major life events.
- To Change Terms: Some homeowners remortgage to shorten or extend the length of their mortgage term.
- To Consolidate Debt: Although it is not always advisable, remortgaging to pay off other debts might reduce monthly payments. This approach carries risks and should be discussed with a financial expert.
Steps Involved in Remortgaging
Remortgaging is typically quicker and simpler than buying a home. Here’s what you can expect:
- Review Your Current Deal: Find out if any early repayment charges or exit fees apply.
- Compare New Deals: Compare interest rates, fees, and total costs of new mortgage deals.
- Apply for the New Mortgage: This will typically include a property valuation and affordability checks.
- Legal Work: A solicitor or conveyancer may be needed, especially if changing lenders.
- Completion: Once approved, your old mortgage is paid off with the funds from the new one.
Things to Keep in Mind When Remortgaging
- Fees: Some deals come with arrangement fees, valuation costs, and legal fees. Always check the overall cost, not just the interest rate.
- Timing: Start looking for new deals 3–6 months before your current rate ends to avoid falling onto the SVR.
- Eligibility: Your credit score and income will influence your eligibility.
Final Thoughts
Remortgaging can be a useful way to manage your finances, but it’s important to weigh up the pros and cons. Speaking to a qualified mortgage advisor or solicitor can help you make the best choice for your situation. Contact Lisa’s Law today.
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