Is Remortgaging a Good Idea?

By  |  0 Comments

There is no simple answer to this question.  It will depend on where in the country you live and whether the housing market there is rising or falling; your personal finances and what you hope to achieve by remortgaging.

Remortgaging to save money

You might decide that since you bought your property, mortgage rates have dropped and that there are good deals around which you want to take advantage of.  If you have been paying your mortgage for a while you will have increased your ‘Loan to Value’ rate, that is, you will have increased the percentage of the house which you own.  If your house has increased in value this will also improve your ‘Loan to Value’, which means that you should be in a strong position to secure an improved mortgage rate and save money on your monthly repayments.  There are however, costs involved in remortgaging and you need to factor these in before making any decision.  Your new lender will charge you an arrangement fee, there will be solicitor’s fees and your old lender will charge you a cancellation fee.

Make sure that you know what these charges are and that they are reasonable.  A key element in the process will be the valuation of your house, for which you will have to pay.  If the valuation is lower than you anticipated, you should negotiate with your lender to ensure that the valuer has taken into account the prices of houses recently sold in your vicinity.  If you take mortgage advice from a qualified expert, you get the extra protection of being able to complain to the Financial Ombudsman Service should you experience problems with your mortgage in the future.  The variety of mortgage deals on offer can be bewildering so take your time and check the market for the best deals.

Remortgaging to raise money

If the value of your house has increased, you may wish to remortgage in order to raise money.  If you are doing this to renovate or extend your property, make sure that your increased borrowing will be offset by the value which you are adding to your property.  Do not assume that thirty thousand pounds spent on building an extension will automatically add thirty thousand pounds to the value of your property.  You may be tempted to raise money to pay off expensive credit card debt.  Although you will get a much lower rate of interest borrowing money on your mortgage, the longer period over which the debt is to be repaid will probably mean that you end up paying far more.  You also need to be aware that if your credit rating has been weakened by credit card debt, you will be unlikely to secure a new preferential mortgage rate.

Remortgaging to shorten your mortgage term

If things are going well for you financially it might be a good idea to speed up the rate at which you are paying off your mortgage.  Before you commit to new, higher monthly payments make sure that you can afford them in the event of future interest rate rises by using a mortgage calculator.

Remortgaging to cut costs –

Check the market for the best deals –

Mortgage calculator –

You must be logged in to post a comment Login

Leave a Reply