Remortgages

Borrowing money to pay off your mortgage and secure that borrowing against your house, is known as remortgaging – essentially it is swapping one mortgage for another.

If the current mortgage deal that you have doesn't suit you because of for example a change in circumstance or if there are better deals available from other lenders, remortgaging enables you to adjust the terms of your mortgage to better suit you and to take advantage of any better deals that there may be out in the market place.without having to move house.

With interest rates at a record low, remortgaging is growing more and more popular as existing borrowers seek to move their mortgage to a lower rate of interest without having to move house.

Arguments for and against Remortgaging...

Reasons to Remortgage:

There are lots of reasons why remortgaging is the right decisions but each depends on the circumstances of the individual household, however one reason remains universally true - to save money and the amount that it is possible to save, can be considerable.

Moving up the Property Ladder

Some mortgages can be moved from one house to another. As well as transferring your existing mortgage, you may need to top up with additional borrowing to purchase a larger or more costly property in which case it is simpler to take out a new mortgage for everything ( redeeming the existing mortgage and paying the extra money needed).

Your existing mortgage doesn't suit your current circumstances

Your salary may have increased or decreased or maybe you have come into a windfall or an inheritance. Either way you may wish to increase or decrease your monthly payments. You may want more flexibility in how you pay your mortgage and your existing mortgage deal does not offer enough flexibility to suit your current circumstances. Your circumstances may be such that you may need to be able to miss a payment or have a payment holiday (for example a change in employment, returning to education, deciding to go travelling).

It could be that you are tempted by the new types of mortgage products coming on to the market such as the new off-set mortgages. It is important to note though that mortgage packages with extra features may come at a cost in the form of higher fees and interest rates.

You’ve got other debts elsewhere which charge much higher interest rates and you want to wrap all your debts into one.

Often referred to as debt consolidation, the advantage of doing this, is to escape from the high interest rates charged on unsecured loans and credit cards by converting the whole of the debt to the considerably lower rates offered on mortgages and this may enable you to lower your monthly outgoings considerably.

You need to think very carefully before you opt to secure all your debts against the title to your house. If you are unable to keep up with your payments, you may be at risk of losing your home. Another thing to consider is that borrowing more money to pay off debts over the term of a mortgage is likely to cost you more in the long run as 10% over five years is less than 5% over 30 years.

Reasons Not To Remortgage:

Remortgaging is not for everyone and the question as to whether or not to remortgage depends on individual circumstances.

Money, timing and personal circumstances are key factors in considering whether or not to remortgage. When deciding whether or not a remortgage is the right for you, you will need to weigh the savings against the cost. Think carefully if you fall into one of the following categories:

Your existing mortgage is already the best on the market

The mortgage deal that you already have may be the best on the market. However, it is important though, not to get too complacent as there are always new mortgage products coming on to the market so it is important to keep a constant eye on the market.

You may be locked into an unfavourable mortgage deal

The early repayment penalties on your existing mortgage may be so high as to make remortgaging unviable. It may be possible that your existing lender will agree to let you switch to a better deal with a reduced repayment charge

If you own less than 25% of your house

If you have a high loan to value mortgage (meaning that you borrowed more than 75% of the value of the house) the fact that the mortgage on your house is more than 75% of the value of the house may make it difficult for your to get a good mortgage deal with another mortgage lender

The value of the house may have gone down along with the value of your equity in it, so the amount you owe is a bigger proportion or it may be that you owe more on the mortgage than the house is worth - known as having negative equity.

Changing Circumstances

Your personal or family circumstances may have changed, for example you may have changed job or employment status or if a couple one of you may have given up work to start a family. Lenders may not be so ready to lend to you because you no longer fit their criteria. If you have little or no equity in the house you will have to stay with the mortgage that you already have.

Poor Credit History

If you have missed payments on a credit card or loan or defaulted completely, you are unlikely to be able to get a remortgage deal if at all. The criteria that lenders are using to assess the eligibility of borrowers for a mortgage is getting tighter and tighter especially with the recent banking reforms. In the aftermath of the credit crunch, lenders will only lend to those people who have a spotless credit record.

The Size of Your Mortgage is less than £50,000

The cost of remortgaging may mean that it is not worth your while remortgaging especially if the amount you owe is less than fifty thousand pounds. Remortgage fees can be in four figures and may outweigh any savings made on mortgages below fifty thousand pounds.