A remortgage is when you move your existing mortgage to a new mortgage deal with a different mortgage lender or you move your existing mortgage to a different deal or product with the same mortgage lender; your new mortgage product will replace your old mortgage.
There are lots of reasons why you might want to remortgage your home which include:
- When the fixed interest rate on your current mortgage product is coming to an end and you want to secure a better deal or rate of interest. When the fixed interest rate period on your mortgage expires, the outstanding mortgage amount is usually then subject to a standard variable rate of interest which as the name suggests, can vary from month to month resulting in uncertainty about your monthly mortgage payments. Many people choose to secure another fixed interest rate to given them more certainty over the affordability of their mortgage repayments. If you have a fixed interest rate, your mortgage repayments will not be affected if and when the Bank OF England increase interest rates.
- If there are better mortgage deals than your existing mortgage product, then you may want to take advantage of one of these deals (but bear in mind that there are costs involved in remortgage and so it is important to make sure the cost savings of any new mortgage product are not outweighed by the cost of remortgaging).
- If there is equity in your property, you may be able to borrow more money. Sometimes it is easier and / or cheaper to borrow more money against your property than it is to take out an unsecured loan; you may also be able to borrow more money when it is by way of a mortgage.
- If your circumstances have changed as a result of a separation or divorce, you may need to remortgage your property to remove your ex-partner from the mortgage (and title of the property). You may also need to borrow more money in these circumstances to buy your ex-partner’s share of the property. In these circumstances, a remortgage will take place at the same time as a transfer of equity.
- If you have a new partner that has moved in with you, you may want to add them to the title and mortgage so a transfer of equity and remortgage is needed to do this.
- If you want to overpay, but your existing mortgage lender or product won’t let you.
- You may wat to switch to an interest only mortgage from a repayment mortgage or vice versa to better suit your financial situation.
Remortgaging may not be the best thing for you to do though if:
- You have a very small mortgage and may be less likely to make a saving if the fees are high
- Your early repayment charge is very large and so it may be too expensive to change your mortgage product until your early repayment charge reduces.
- The value of your home has dropped
- You’ve had credit problems since taking out your last mortgage – lenders can be selective about who they lend to and the Financial Conduct Authority requires them to carefully check mortgage affordability to ensure you could afford to pay.
- You’re already on a very good rate.
You should always weigh up the pros and cons or remortgaging and speak to a mortgage broker for advice on what the best deals are for you and your situation.
