Remortgaging is where you change the mortgage product that you already have. Remortgages can be for a variety of purposes. You may want to switch to a better rate, or even reduce your monthly payments. You might want to release equity from your home.
When Should I Remortgage?
There are a number of instances when you should look at remortgages.
To Get A Better Deal
It could be that you’re eligible for a better rate, especially if interest rates have recently risen, or you’re on a Standard Variate Rate (SVR) mortgage. It could be you’ve been on an old fixed rate mortgage and have lowered your loan to value. It’s important to be aware of any early repayment charges (ERC’s), as these could mean it’s not worth switching, if you have to break out a current deal.
Remortgage for Debt Consolidation
Remortgaging can help you to consolidate any outstanding debts. By repaying your other outstanding finance agreements with money from your home, you essentially make the repayments into your mortgage. Depending on the other finance, it could be at a lower rate. It may also be more straightforward. Managing just your mortgage payment, which you’d have anyway, is better than numerous accounts of different payments over different terms.
Remortgage For Home Improvements
Instead of taking out a loan for home improvements, remortgaging could let you release funds from your home, to be repaid at a better rate. By releasing equity in your home, you could get the funds for an extension, or maybe a new kitchen. The added advantage is any improvements you make add to the value of your home.
Pros and Cons of Remortgages
- Remortgaging lets you free up cash if you’re looking to fund an expensive purchase, or looking to easy any financial difficulties.
- It can also help you get a better deal on your current mortgage.
However, there are some risks that remortgaging presents:
- Your home is at risk if you don’t make the repayments.
- Remortgaging isn’t always straightforward, with new product fees and early repayment charges to be considered alongside a potentially better rate.
Remortgaging With Bad Credit
As difficult as it may seem, remortgaging with bad credit is possible. It’s likely that High Street lenders will be tough to get approved with, but specialist lenders are on hand to help. Mainstream lenders create mortgage products for the masses, but specialist lenders have products tailored to more specific circumstances.
There are other ways to release equity from your home, without remortgaging.
Second charge mortgages, or secured loans as they’re often referred to, are loans secured against your property. The reason it’s known as ‘second charge’ is because it’s the second priority to be paid, behind the mortgage (which would be the first charge).
You often need at least 15% equity in your home to qualify for a secured loan and because it’s secured against your home, there is a risk of repossession if you don’t keep up the payments.