Remortgaging is when you change your mortgage to a different lender. Some people think that it means releasing some equity in your home, so making your mortgage higher so that you can have some money to spend on other things. While you might be able to do this, remortgaging just normally refers to changing your lender. It is something that quite a few people do and therefore you may wonder whether it is something that you should consider doing as well.
Advantages of Remortgaging
- Cost – you may find that if you switch to a different mortgage you can save money. It is worth investigating this fully though. Most people will just compare the interest rate and assume that if they go to a mortgage provider with a lower interest rate it will mean that they will save money. This seems to make logical sense but you will need to bear a few things in mind. You need to consider the fact that there may be other fees as well. There could be admin fees when you take out the mortgage for example, and although these are unlikely to be huge if the interest rates are only slightly less it could be significant. You also need to think about the fact that you might have to pay a fee to your current lender. This might sound odd but many of them have something called and ‘early redemption fee’ which is a charge you will have to pay if you leave early. These are more common if you are in fixed rate period, but they could be on any mortgage. Ask your lender if you will have to pay anything if you swap to a different lender to be sure. Some may only charge a small handling fee but some can be significant amounts of money so you will have to consider that and think about whether this is something that will be worth paying. It can be good to work out how much money you will save by paying less interest and whether it will be more than this fee.
- Term – You also might want to think about how long the mortgage lasts, which is often referred to as the term. You might want to extend the mortgage so that you will not have to repay so much each month or you might want to pay it back more quickly so you can end the mortgage earlier. Some lenders will be flexible and will allow you to make extra payments if you want to or pay a bit more back and so it is good to think about whether this might be something that you will find useful.
- Repayments – It is also good to take a look at how much you will be expected to repay each month. It might be that you want to remortgage so that you can reduce how much you repay so that you can find it easier to repay each month. If you are struggling with repayments then this can be extremely helpful. It might be that the repayments will be higher though. This could be okay if you are managing fine, but if you are not then you may want to look for lower rather than higher repayments or at least ones that are the same. You also need to take care to consider the fact that if the mortgage rate is variable then it might go up and this will mean that you will have to pay more each month. You will need to calculate whether this is something that you will be able to afford or whether you need to think about going for a fixed rate where this will not be a risk.
- Better Service – it is also worth thinking about the customer service and whether you will be switching to a lender that you feel will be better with regards to how well they treat their customers.