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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. Lets say you want to convert your loft into another room and it’s going to cost you £20,000. You can release the equity in your home by remortgaging your property. In this example you would take out a new mortgage for £120,000. You’d therefore pay the old mortgage (£100,000) off and be left with £20,000 to renovate your home. You might find that the interest rate on the remortgage is lower and so you’ll pay back less overall 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 mortgage 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, if you repay the mortgage early or if you decide to remortgage / switch deals before the fixed rate deadline ends.
You can be charged certain fees by your existing lender as well as the remortgage lender. There might also be additional fees involved in the process.
If you are looking to remortgage while still being on a fixed-rate mortgage, you will likely have an early repayment charge. It’s best to speak to your lender about what this might be, but it’s likely to be between 1-5% of the outstanding balance.
An arrangement fee is charged to cover the lender’s administration costs. Lenders can offer you a low fee/high-rate deal or a high fee/low rate deal. A mortgage broker can advise you on whether to add the arrangement fee to the remortgage or pay it as soon as you can to avoid interest on it.
A few lenders charge a reservation or booking fee to secure a tracker, discount, or fixed-rate remortgage deal. You usually have to pay this fee when you submit your remortgage application.
Your property can increase or decrease in value since the last time it was valued when you applied for your first mortgage. Therefore, if you want to remortgage, the lender will have to ascertain the true value of your property. A valuation fee can be around £400 to £600 in most cases.
To remove the original lender’s interest from the property and assign it to a new lender, sometimes, you have to pay the legal fees associated with the process. However, a lot of remortgage deals come with a free legal package but it is a good idea to check if your lender is charging this or not.
When you use a broker for a remortgage deal, they can charge you a broker fee that can be either a percentage of the loan amount or an agreed-upon fixed fee. The broker fee varies from broker to broker.
Mortgage brokers help facilitate the process of remortgaging and often save you a lot of money in lower interest rates and discounts on various fees. If you want to speak to a mortgage broker that specialises in remortgaging, click get started below and one of our expert advisors will call you straight back