As someone who is yet to own a house, you would think that I probably didn’t know much about mortgages or any of the terms around it but in fact you would be wrong. In the past few years, multiple family members and friends have bought or sold properties, some even remortgaged. We have even applied for a mortgage in the past – let down by Steve’s credit rating and now will be applying again in the not too distant future hopefully – fingers crossed!
I wanted to talk about how you can save yourself some money by remortgaging. Now remortgaging isn’t for everyone, let me say that first off. Remortgaging can come under two umbrellas – it is essentially taking out a new mortgage on a property you already own but it is either a) to replace your existing mortgage or b) to borrow money against your property. Now quite clearly b wouldn’t be saving you money in the long run as you’ll still be paying it as you’ve borrowed against it so I wanted to talk about why you would want to remortgage and replace your existing mortgage.
Did you know that around a third of all home loans made in the UK are actually remortgages? I bet you would never have considered that so many of them would be! So why should you consider it and how can you save money by remortgaging? I’ve been looking at an online mortgage adviser, Habito, to see how remortgaging could work for some people.
Has your home increased in value?
If your home has increased in value exponentially, then remortgaging maybe something you want to consider. You may find that you aren’t but you may also find you’re in a lower loan-to-value band and therefore could be paying much lower rates.
Is your current deal about to end?
Some mortgages that seem great are only short term deals and you’ll find that once that deal ends, you will be paying a lot staying in that same mortgage. Many of the best ones only last from two to five years and you don’t want to be put onto the variable rate. It is bound to be higher than your previous rate and much less affordable than a remortgage to a cheaper rate.
You want to pay off your mortgage as soon as you can
Why would I suggest remortgaging if you want to pay it off quicker? Simply put, some mortgage providers won’t allow overpayments and if getting that mortgage out of the way is important to you, it may be worth remortgaging to a different one. You should be able to reduce the loan size this way and get a cheaper rate too – it is important to keep an eye out for early repayment charges though and factor these into your sums before making the leap. Also think about potential exit fees – this is something you also need to account for.
You want to change the type
Many people start on an interest only and want to switch to a repayment mortgage. Most lenders will be happy to move you across but if not, then remortgaging may be an option for you. Interest only mortgages work out much more expensive in the long run so why wouldn’t you want to make the switch?
Here are just a few ways you can save money by remortgaging – but remember, it is entirely up to you. It isn’t for everyone and I wouldn’t suggest doing it unless you feel absolutely sure it will work for you and your family. Is this something you have ever considered?