Remortgaging
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A remortgage is a new home loan taken out by someone who already has a mortgage. A person who remortgages is, quite simply, changing their mortgage deal.
People remortgage for two reasons. The first is because they want to switch to a better deal, usually with a different lender. The most likely time for this to happen is if someone has been on a special deal and this is about to come to an end. Most lenders, at this time, will automatically switch your mortgage to their standard variable rate (SVR), which can be quite high. However, this is usually the perfect time to find a new, better value, mortgage.
The second reason people remortgage is because they need money. By taking out another larger mortgage with their lender - or, indeed, another lender - they can release some cash for themselves.
Remortgages are exactly the same as any other mortgage. They come as fixed-rate products, trackers, discount mortgages or 100 per cent deals. Likewise, borrowers can opt for an interest-only deal or a repayment mortgage.
Who are Remortgages for?
Anyone with a mortgage could, and probably should at some point, remortgage. This is because once you start paying your lender's SVR it is very likely you will be paying far more than you need to in interest.
Changing to a more competitive deal will save you money. Likewise, some people find their mortgage doesn't fit their circumstances. They might be earning more money and can afford to make larger repayments.
Remortgages are also for people looking to release some money for themselves. People who need extra cash to make home improvements, pay off debts or to fund a large purchase commonly do so by remortgaging.
Pitfalls of Remortgages
The main problem most people encounter when remortgaging is with their current mortgage. Some lenders put in place penalties for borrowers who decide to leave their deals early. These charges, know as early repayment chages (ERC)can be quite hefty - as much as two or three per cent of the entire loan - so it is wise not to remortgage until you are clear of the penalty period.
Other pitfalls of remortgaging are concerned with remortgage deals themselves. A new deal might have an attractive rate, but the fees and legal costs could actually be higher than the savings you make by remortgaging and should be weighed against the cost of staying with your current mortgage lender.
If you are remortgaging to make yourself more money, you might find your repayments become higher. Or your mortgage will need to be paid over a longer period of time.
Where to buy Remortgages
Remortgages come in the same package as mortgages. Therefore, where you go to get your remortgage depends entirely on the type of deal you want. The common fixed-rated or variable deals will be readily available at most high-street lenders.
The main point of remortgaging is to find a better deal, so it is worth really scouring the market for the most competitive product. Price comparison websites are good for this, but should not be relied upon entirely as they often don't cover the entire market. It is also advisable to seek indpendent advice from a mortgage broker who will usually be able to search the market for the best deal for your individual circumstances.
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