A remortgage occurs when a mortgage holder renegotiates the terms of the original mortgage. The terms may include the interest rate, repayment method, the loan amount and the mortgage lender.
The amount of money that is borrowed when a home owner is remortgaging can be more than the original mortgage and the new mortgage is almost always obtained from a different lender.
If you are staying with your current lender, then you may want to negotiate a better deal in an attempt to secure a lower monthly payment, otherwise you may take up the option of moving your mortgage elsewhere.
Who Could Benefit
Finding a good remortgage deal will benefit a homeowner in the following ways:
• Mortgage holders may get the opportunity to reduce or keep the same mortgage payments depending on the interest rate they secure.
• Home owners may be able to release the equity out of their home and carry out home maintenance activities or build extensions for example. With a good deal, they may be able to do all this without increasing their mortgage payment.
• If a home owner has numerous debts with various lenders, finding a good remortgage deal could help them consolidate their debts into one affordable monthly payment.
• If your fixed rate has ended with your mortgage lender, you may be forced to start paying the standard variable rate. However if you remortgage, you may get a better deal and keep your monthly payments low.
The upside of remortgaging your property is as follows:
• You may be able to secure a more attractive interest rate
• With a lower interest rate, you may find that your monthly payments are lower or they may stay around the same level as your old mortgage even though you borrowed more money with the new lender
• You may be able to release the equity in your property to be used in any way you like
• You may have the opportunity to choose a different provider if you had a bad experience with your current provider
Some of the Cons
• Depending on the type of mortgage you choose with the new lender, you may have to pay an arrangement fee
• The new terms of your mortgage may also include early repayment charges
• Lenders may not want to lend as much as you expect for the interest rate you receive
Finding a good remortgage deal may take a bit of searching and comparing the market, but once it is found it should be financially beneficial. The key points to remember are:
• When remortgaging, a homeowner may want to secure the best rate and the highest loan amount possible
• Remortgaging can be done with the current lender or via a new lender
• Remortgaging can be used for consolidating debts and obtaining a lower overall monthly payment
• Choosing a new lender for a mortgage may give you the opportunity to avoid paying your current lenders standard variable rate once the promotional fixed rate is completed
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