Remortgaging is a great way for homeowners to save money, especially in the long run. It is a fairly straightforward process, as long as you know what you are doing. This guide will cover all the basics, from calculating the cost of remortgaging to getting the best rates, to help you make the most of your money. So, let's get started!
What is Remortgaging?
Remortgaging is simply taking out a new mortgage to replace an existing one. This can be done for a variety of reasons, including to take advantage of lower interest rates or more suitable rates, to access additional funds, to consolidate debt, or to switch to a different lender. It can be a great way to save money, but it is important to understand the pros and cons of remortgaging and how to calculate the cost before you make a decision.
Pros and Cons of Remortgaging
There are several pros and cons to remortgaging that you should consider before making a decision. On the plus side, remortgaging could give you access to a lower interest rate, a longer repayment term, peace of mind against interest rate fluctuations or additional funds for renovations or other projects. It can also be a great way to consolidate debt and save money in the long run.
On the down side, remortgaging can come with a range of costs, such as an early repayment fee, an application fee, and legal and valuation fees. You may also have to pay a higher rate of interest than you currently have, and there is always the risk of your application being rejected. The use of a mortgage broker can help to navigate all of these obstacles.
Calculating the Cost of Remortgaging
Before you decide to remortgage, you need to calculate the cost. This includes the upfront costs, such as the application fee and legal and valuation fees, as well as the ongoing costs, such as the interest rate. You should also factor in any potential savings from a lower interest rate or a longer repayment period. If the costs outweigh any potential savings, remortgaging may not be the best option for you.
How to Choose the Right Interest Rate and Mortgage Product
Choosing the right interest rate is essential when remortgaging. You should compare rates from different lenders to get an idea of what is available and then decide which one is right for you. You should also consider the type of loan you want and the length of the repayment period. If you are consolidating debt, you probably want to look for a loan with a lower interest rate and a longer repayment period to save money in the long run.
We cannot recommend enough the benefit of speaking to a mortgage broker to guide you through all of the above and getting a free consultation on your own circumstances. Many of the UK Lenders have products and interest rates not available to the public unless you go through a mortgage broker - we recommend speaking to any of the award winning mortgage brokers at Mortgage Joy (FCA: 955439)
How to Shop Around for the Best Remortgage Deal
Again, shopping around for the best remortgage deal or use a Mortgage Advisor to do it for you. It is essential if you want to save money. You should compare different lenders to get an idea of what they offer and then make sure to ask questions to get the full picture. You should also consider any potential costs, such as an early repayment fee or legal and valuation fees, to make sure you are getting the best deal.
Finally, you should make sure you have a good credit score and a stable income to get the best rates. Just when you got your first mortgage to buy the property, the lender will want 3 months' bank statements and will check your credit file. Having that in order before beginning the process will increase the no. of mortgage products you can avail of.
How to Save Money by Remortgaging
Remortgaging can be a great way to save money if you do it right. One of the best ways to save money is to switch to a lower interest rate, as this can save you a lot of money over the life of the loan. Interest rates in the UK have been in a state of fluctuation since Kwasi Kwarteng's mini budget last year but as of writing (January 2023) rates have been dropping quite rapidly. You may want to consider switching to a longer repayment period, as this can reduce your monthly payments and save you money in the long run. Again - a mortgage expert with lots of experience advising clients would be my recommended starting point. Even if not someone on the Mortgage Propeller platform.
Common Mistakes to Avoid When Remortgaging
When remortgaging, it is important to be aware of common mistakes that can cost you money. One of the most common mistakes is not actually remortgaging. Letting your fixed rate mortgage lapse and move on to the usually more expensive Standard Variable Rate. While shopping around for the best deal through a mortgage broker with access to thousands of mortgage produce is best, you should also be careful to calculate the costs of remortgaging and avoid taking out a loan with a higher interest rate or a longer repayment period than you need - again a mortgage advisor can guide you on this (Yes, I know I keep saying this. But its true)
Remortgaging for Debt Consolidation
Remortgaging can be a great way to consolidate debt and save money. When consolidating debt, you should probably look for a loan with a lower interest rate and a longer repayment period. This can reduce your monthly payments and save you money month to month (although is likely to increase the cost of the loan in the long run). You should also compare different lenders to find the best deal and make sure to calculate the costs of remortgaging before you make a decision.
Conclusion
Remortgaging can be a great way for homeowners to save money, but it is important to do your research and understand the pros and cons before you make a decision. This guide has covered all the basics, from calculating the cost of remortgaging to getting the best rates, to help you make the most of your money. With the right knowledge (a great mortgage broker) and a bit of research, you can be sure to get the best remortgage deal for your needs and help you save big!
