Is it ever a good idea to remortgage?

Remortgaging is something that has grown in popularity in the UK in recent times, and indeed around a third of home loans that are approved these days are actually remortgages. But what exactly are the benefits, and why are so many homeowners inclined to go down this route?

thoughts on a remortgage

As commitments go, other than raising a family, buying a home and paying a mortgage is about as significant as it gets. Indeed, the average UK mortgage is now in the region of £85,000. It thus makes sense to try and streamline this debt, and make it as cost effective as possible. And taking out a new mortgage to replace an existing one is one way of doing this, provided the circumstances render such a choice to be suitable.

Best times to remortgage

Certainly the main reason to remortgage is because, well, you want a better rate. The catch here is that you will likely be tied into a mortgage that has an early repayment charge. But even after factoring this in, it may still be worth your while if the alternative rate you are being offered is far superior.

But there are other reasons too. For starters, you may fear that base rates may be on their way up. At this stage, it seems unlikely given most forecasts, but it is something to be conscious of. Alternatively, the value of your home may have rocketed since you bought it, which would put you into a lower loan-to-value band. This in turn would mean that you should be eligible for a lower rate, making remortgaging appealing.

Another time homeowners often look to remortgage is when the initial rate agreed on a mortgage is about to end. Often the best deals are short-term ones of less than five years, with it reverting to the standard variable rate thereafter. If this new rate is likely to be considerably higher than some of the other deals being offered, remortgaging with one of these could save you a boat load.

Borrowing more

There are many good reasons to borrow extra money on a mortgage; whether it’s for home improvements, a new car, consolidating other debts or even to go on a once-in-a-lifetime family holiday. There’s nothing wrong with doing any of those things, and if the current mortgage provider isn’t willing to lend further (or will only do so at a hefty rate) to you, then remortgaging can be a good option.

But the mistake can come in where you believe it is the only other option. People often assume that secured loans are better value than unsecured loans, and only take into account the headline rate without looking at all the fees involved, and factoring the loan term. Sometimes personal loans can be a cheaper, easier and more convenient way of borrowing – provided you have a sound credit history of course.

Deciding on what steps to take

Whatever your thoughts behind looking to remortgage, the important thing is to ensure that you are doing it for the right reasons, and that circumstances are suitable for it. If you do decide it’s the way

to go, then be sure to shop around, and spend time researching so that you find the best deal you possibly can. This useful comparison tool should help the cause, while it is also a good idea to speak to a mortgage broker.

The good news is that, if done effectively, remortgaging really can save you and your family hundreds, or even thousands of pounds each year. And with such a handy cash injection, you really could walk away with a smile on your face, knowing you’ll have a new windfall to put towards the things in life that really matter – your family.

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Disclosure: This is a collaborative post

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