If you need extra cash for any reason, you can raise it by taking out a second mortgage on your property or redefining the terms of your mortgage with your current provider. This is known as remortgaging. Remortgaging can be beneficial if done for the right reasons, but there are some situations where it is advisable to stick with your current deal.
Wondering if remortgaging is the right option for you? In this short read, we will consider five valid reasons why you should consider remortgaging.
To get a better mortgage deal –
When you start with a mortgage company for the first time, you will likely be placed on what is known as an initial rate. This is a practice targeted at attracting new customers. However, this initial interest rate period usually last for a short time, typically between one to five years. At the expiration of this initial rate period, you will be placed on the lender’s standard variable rate which will definitely be higher than you were expecting. Remortgaging gives you the opportunity to either make a new deal with your lender or switch to a new company. When you remortgage, you are open to plenty of better deals than you are currently on.
The value of your home has appreciated –
Lenders typically charge a lower interest rate for homeowners who are in the lower loan-to-value (LTV) range. This usually happens when your home has increased in value since the time when you took out the mortgage. You can take advantage of this appreciation in value to get a better mortgage deal.
You can even enjoy further benefit in this increase in value through equity release (although this is a decision that should not be taken lightly). Remortgaging is one of the ways to go about this as your new LTV can be included in the terms of the new deal.
Debt consolidation –
Debt consolidation is another good reason to consider remortgaging. If you are battling with multiple debts, you may want to use your home as security to acquire the funds you need to clear off those debts, so that you have only one form of debt on your shoulders, which you can pay with a single flat interest rate.
It is important to point out that you will likely be paying more when you add these debts to your mortgage, but the advantage is that you will be faced with only a single interest rate rather than different rates on the many debt sources, and you can also spread your repayments over a longer time.
You are worried about an increase in interest rates –
When interest rates increase, it will affect the cost of your mortgage, therefore, it makes sense to look for a better mortgage deal if you feel that an interest increase in inevitable. However, before you make this decision, be sure that the Bank of England will actually increase interest rates. However, if this expected increase is for new customers only, there is no need to remortgage as this will affect you as a new customer when you move over to a new lender.
You want to borrow more –
There are dozens of reasons why you may want to borrow more. You may need the money to carry out essential repairs in your home or meet your other debt commitments. Whatever the reason, if your current lender has no provisions for extra lending, or they are offering unfavourable terms, remortgaging with a new provider may be the solution.
Remortgaging can provide you with the extra cash you need at a lower interest rate. All you will need to do is show proof that the money will be used for the stated purpose. However, it is a good idea to first calculate the cost and benefit involved in switching mortgage providers so that the cost does not cancel out the benefits.