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When you take out a new mortgage, it is likely to be a fixed-rate mortgage. This means your lender will offer you a fixed interest rate for a small period of time, usually 2-5 years. The fixed interest rate is normally very low to entice new customers. Once this fixed term ends, you will move onto the lender's standard variable rate (SVR). The SVR is nearly always more expensive than the fixed rate offered to new customers. Therefore, depending on how much you owe (your mortgage balance), moving to the SVR could mean much higher monthly mortgage repayments for you. However, once your fixed-rate term ends, you are free (without incurring an early repayment charge) to remortgage and find a new fixed-rate mortgage.
If your property price changes it will mean your loan-to-value (LTV) also changes. If the property price goes up and therefore the LTV goes down, you will have more equity available in your property. Some people choose to remortgage and spread their payments over a longer-term when this happens in order to decrease the amount they repay each month.
If you have debts, it’s possible to add these to your mortgage balance when you remortgage. This might be used as a way to consolidate them into one payment and potentially save on the interest due for the debts. Several reasons to determine whether or not you would want to get a remortgage to consolidate debt. • You have the affordability to keep up with the monthly payments until the loan term is over and your debt is settled • You want to take the loan to get your financial life back in order by clearing any outstanding debt • You want a loan that has a lower interest rate and less total payable amount compared with the debt interest rate
If you are looking to borrow money to make home improvements such as adding extra bedrooms or bathrooms, it’s possible to do this with a remortgage. For example, if your home’s value is £150,000 and you have a mortgage balance of £100,000, it means you have £50,000 of equity in your property. You can release that equity by remortgaging your property for home improvements. If you are looking at this as a potential route, it might be an idea to look at increasing the amount you borrow when you remortgage, especially if the fixed term is coming to an end or you are already on a variable rate. You might find that the interest rate on the remortgage means you will pay back less interest than if you took out an additional secured or personal loan.
If you are looking to switch to a new mortgage type, you can do this with a remortgage. For example, an interest-only mortgage is beneficial for a lot of reasons but if you decide to pay the loan amount as well as the interest, you can switch your payment type from an interest-only to a repayment plan with a new remortgage deal. Note: Switching payment types from interest-only to repayment is not only possible but is often encouraged by a lot of mortgage lenders.
Overpaying your existing mortgage means you can pay your mortgage balance quicker. However, if your current lender does not allow you to make overpayments, you can look for a more flexible remortgage deal that allows you to make a larger payment each month with or without switching your payment type. Note: You may have to pay an Early Repayment Charge (ERC) if your lender has a set limit (allowance) regarding mortgage overpayment.