Remortgaging: Cheaper Mortgages Save Money in the Long Run

Remortgaging: Cheaper Mortgages Save Money in the Long Run

When you got your mortgage, you may have thought you were in it for the long haul. What could be a greater declaration of long-term commitment than investing in a home? But you never know what the future may bring, and circumstances may arise where you decide the deal you started with is no longer the right one for you. Fortunately, there's always a way out.

Remortgaging your home

Can you swap your old mortgage for a new one? The answer to that is yes. Of course, the trickier question, and the one you're probably more interested in, is should you swap your old mortgage for a new one?

Remortgaging is the process whereby you switch your existing mortgage to a different provider, or perhaps even renegotiate your deal with the same lender. Reasons for remortgaging include:

Saving money:

It may be possible for you to get a deal with better rates and more flexibility, allowing you to save on monthly repayments and perhaps even pay back your mortgage within a shorter time frame. This would be especially desirable to those whose home has fallen in value since they purchased the mortgage. Nationwide suggests using the overall cost for comparison or Annual Percentage Rate (APR) to compare your current deal with what's available.

Raising money:

On the other hand, if your property has risen in value, you may be able to increase the mortgage in order to pay for an expensive purchase, such as a car or luxury holiday. You could also remortgage to release equity from the home and use it to pay off debts.

• Home improvement

Is your current home too small for your needs, but is in a good location and you don't want to move? Simply remortgage the home in order to pay for extensions or alterations, boosting the home's value in the process.

The price of remortgaging

Contracts aren’t easily broken. Your lender is going to require some compensation, especially if you're moving to a new lender. Charges for remortgaging will usually include an exit fee paid to your current lender as well as a repayment charge. There will also be admin fees paid to your new lender (if you're changing lenders) and legal fees for the transference of property.

With all these fees, one may be wondering whether it's worth it. However, according to Victoria Bischoff, mortgage rates are currently the lowest on record, meaning homeowners could remortgage their home and come out of it £1,000 the better, even after paying the exit fee and accompanying charges.

Of course, this depends on the gap between the current rate and the new offer, as well as the size of the exit penalty. But with four in ten borrowers still on default rates, at least three million homeowners could save by remortgaging.

If you're looking for professional advice on whether or not such a deal suits your circumstances, contact a financial advisor. For advice on the property market in general, give Tepilo a call.

Disclaimer The information and data provided are for general information purposes. They do not constitute investment advice nor can they take account of your own particular circumstances. If you require any advice on investments, you should contact a financial or other professional advisers.

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