For the vast majority of homeowners across the UK, securing and paying off a mortgage will be the biggest financial commitment of their lives. However, it’s a chance for millions across the country to become masters of their own destiny, owning their own home and creating stability for their families.
A property owner can remortgage by taking out a brand-new mortgage on a property they already own. This replaces an existing mortgage or allows you to borrow money against the equity in your property.
Remortgaging is becoming an increasingly popular strategy among British homeowners. One of the biggest motivations for remortgaging at the present time is the fact that interest rates are at an all-time low. Mortgage lenders are offering rock-bottom interest rates, with The Telegraph reporting all-time low rates even for first-time buyers. Therefore, property owners are seeking to remortgage and take advantage of these rates before interest rates bounce. There is a feeling a bounce may occur if and when a Brexit deal is eventually agreed between the UK and the European Union, providing greater certainty to the UK economy.
How else can remortgaging benefit you and your family? Let’s take a look at some of the common scenarios where homeowners consider remortgaging to improve their financial situation.
When a property’s value has risen significantly
If the value of your home has increased rapidly during the period of your existing mortgage deal, it should be possible to remortgage and obtain a mortgage deal with a much smaller loan-to-value (LTV) percentage. For instance, if you purchased a property on a 95% LTV mortgage that was worth £150,000 and it’s now worth £200,000, it’s possible to remortgage and get a 75% LTV mortgage that offers a much lower interest rate and subsequent monthly repayments.
When a homeowner is looking to borrow more funds
There are various reasons why you may choose to remortgage your property to obtain more funds. You might want to remortgage and increase your mortgage to pay for home improvements such as new kitchens, driveways or extensions. If your property’s value has increased significantly since negotiating your last mortgage deal, it may be possible to remortgage on an improved LTV and borrow more without having to pay a penny more in terms of monthly repayments. If you are also earning more money, it should be easier to borrow more money from high-street lenders. Most mainstream lenders will be willing to lend upwards of four times you and your partner’s combined salary. In fact, Trussle reviews RBS mortgage rates amongst other lenders, they also report that some applicants can borrow as much as 4.8 times their combined salary, which will be music to the ears of those seeking more funds.
When a homeowner is seeking a more flexible mortgage
If you have recently gone self-employed, you might want a new mortgage deal that offers a little more flexibility to deal with your fluctuating lifestyle and income. You may remortgage with a lender that offers repayment holidays, allowing you to take longer-term holidays. Remortgaging can certainly give you the freedom to pick and choose a deal and rate that suits your needs at the present time.
When a homeowner wishes to overpay without an early repayment charge
If your financial circumstances have changed, perhaps due to a pay rise or inheritance, and you wish to repay your mortgage quicker than your existing deal allows, you should look to remortgage. Some lenders will allow you to overpay without early repayment charges or exit fees, giving you the freedom to reduce your mortgage whenever you see fit.
If you are considering remortgaging, always be sure to look at the drawbacks as well as the financial benefits of moving to a new mortgage deal. It might seem good on the surface but read the fine print to ensure you’re aware of all the terms and conditions. If in doubt, get a reputable online mortgage broker to give you a hand and find the fairest available deal for you.