Why Remortgage Your Home?
Remortgaging, or switching your mortgage, is not the same thing as refinancing, although the two things are sometimes confused. Remortgaging is when a homeowner switches to a new lender, but keeps the same product – their mortgage. The mortgage is then paid off by the new lender or mortgage company, often at a lower interest rate. If you are changing your mortgage and keeping the same lender, this is not remortgaging.
A homeowner may choose to remortgage for several reasons. In addition to the main goal of enjoying a lower interest rate and lower monthly mortgage payments, remortgaging also allows you to access the equity in your home. Remortgaging does not involve taking out a second mortgage; rather, the old mortgage is replaced by a new one. If you are a homeowner who has paid off your home and are thinking of buying a second home, the remortgage process allows you to do that without having to be approved for a new loan. Investors can also benefit from remortgaging, as the process solves the common problem of mortgage interest rates on an investment home being higher than those on a primary residence.
Because of the lower interest rate, remortgaging may also be a better option than a home improvement loan. A remortgage can also be used to consolidate debts that carry higher than average interest rates, such as credit card debt. Many borrowers regard it as a way of starting over. However, be careful if you are thinking of remortgaging as a way to eliminate high interest unsecured debt, as the payments are now secured on your home.
Some older borrowers can find it difficult to apply for a 25 or 30 year mortgage, solely due to their age. The requirements for remortgaging are not as demanding, making it an ideal solution for older people.
If you are thinking of remortgaging, always read the small print; you should also consider whether there is an early redemption charge on your current mortgage. This can void any savings that you stand to gain from your new mortgage.
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