Remortgaging is the process where you switch your mortgage to a new deal. It doesn’t involve moving houses, but rather replaces the previous mortgage using the same property as a security. Whether you are committed to a variable mortgage, or fixed-rate mortgage; you can consider remortgaging depending on your change of circumstances.
Key Things to Consider
- Eligibility for Remortgage: Most lenders require 38% and lower percentage of your earnings to debt ratio for remortgages. They also need less than 80% of loan to value ratio.
- Exit Fees: Check with your lender how much you have to pay for the early repayment of your current mortgage. Sometimes, these charges can be so huge that the fees would surpass any savings from remortgaging.
- Arrangement Fees: Remortgaging usually comes with a hefty arrangement fee. Therefore, it’s may not be the best idea if your current loan falls below a certain level.
The Benefits of Remortgage
- Switching to Repayment Mortgage: It’s not very difficult to switch from an interest-only mortgage to a repayment mortgage. However, remortgaging often offers the flexibility of keeping part of the loan with interest-only mortgage.
- Better interest rates: If you are stuck with a high interest rate, remortgaging would enable you to compare the current market rates and may land you a better deal.
- Extending the Mortgage: Some mortgages only offer a fixed rate of interest for a limited period of time. Therefore, if you want to avoid paying variable rates, remortgaging is the way to go.
- More Flexible Mortgage: Initial mortgages often come with issues like no overpayments, no additional loans, etc. The best way to get around it is to remortgage with a more flexible lender.