What is a Remortgage?
In simple terms, the process of remortgaging is to change the mortgage you currently have on your property. This could be for a number of reasons, whether you want to change your current lender or if you want to find a better deal. You may also want to remortgage to fund home improvements, or for debt consolidation. The increased cost of living in 2017 saw an increase in people remortgaging, as they decided to remortgage to ease any financial issues, instead of turning to outside lenders or other forms of finance.
Why You Should Remortgage?
For most people, your mortgage is your biggest financial commitment, therefore, saving money on it would be a real bonus and that’s the main reason why people remortgage – to save money.
The bargain hunters among you may have shopped around and found a better mortgage deal that suits your financial situation more so than your current deal. This is not unheard of, as lenders know too well that people’s priorities change and consequently, their mortgage deal may need to change too. That being said, lenders aren’t always accommodating towards those that want to remortgage.
In order to free up cash, you may decide to remortgage for home improvements. Providing you have a certain amount of equity in your property, you can change your mortgage deal to free up some of that equity and put it towards housing renovations, as they can amount to a large expense. Of course, you don’t have to put it towards housing renovations, you can do whatever you wish with the money.
You may be looking to venture into property and you may require a certain amount of funds to do so. Those looking to buy a holiday let may look into remortgaging their current property in order to pay for their new one if they don’t have the cash readily available.
You can also remortgage for debt consolidation. If you are in a position where debt has taken control of your life and you have found yourself needing to pay off a large amount without the cash to do so, you can remortgage to release equity to pay off your outstanding debts.
Remortgaging can be a financial lifeline to those who need it, but what are the downsides to it?
If you are looking to remortgage, it’s best not to expect a quick process. Like many things in the financial world, it can take quite a while, particularly if you are switching to a new lender.
You may be hit with a huge early repayment charge which makes remortgaging a lot more difficult from the outset. Early repayment charges are issued by lenders as a penalty for leaving a deal early. For your original lender, leaving a deal early is not something they will welcome and therefore, they will insist you pay a certain amount – this amount can sometimes be a lot. You could look to switching deals but staying with your current lender to reduce the risk of an early repayment charge.
To avoid any mishaps, it is always best to check your current mortgage terms to ensure you aren’t going to run into any unwelcome fees. You can also check with your current lender if you are able to transfer your current deal or if there will be any risk of a repayment charge should you remortgage.
If you fail to make your repayments on time, you will risk the repossession of your home – so it’s important to consider the risk and decide whether it is worth remortgaging or not.
Remortgaging with Bad Credit
If you want to remortgage but you are worried your bad credit score will affect your chances, then fear no more. The best thing to do to increase your chances is to approach a specialist lender, rather than a high street lender. High street lenders may view you as too much of a risk and it’s extremely likely you will be declined as a result. High street lenders will assess your credit score and if you are declined, your credit score may be damaged even further. Approaching a specialist is your best bet.
If after reading up on remortgaging, you think it may not be the most suitable way to save money, you could consider a second charge mortgage.
A second charge mortgage is a secured loan taken out by a homeowner against their property. In order to get a second charge mortgage, you will need to have at least 15% equity in your home. One thing a second charge mortgage has over remortgaging is the ease and time it takes to set everything up. If you are looking for a quick fix, then a second charge mortgage may be the best option.
If you are looking for more information on remortgaging, then do not hesitate to contact us for any further information.