When you remortgage, you pay off the mortgage with your current lender and switch to a new lender. There are many reasons why you might consider remortgaging your property and these include; getting a better rate to reduce payments, consolidating debt and home improvements.
When you take out a new mortgage, you normally get an introductory deal which could be a low fixed or discounted or tracker rate for the first few years of your mortgage.
Generally these special introductory deals last between 2 and 5 years although there are some longer deals on the market. When your deal ends, the lender may offer you another deal or they might change your mortgage rate to their standard variable rate (SVR) which could be higher than you would be offered by an alternative lender.
By remortgaging to a different lender at the end of your deal you could get a better rate and reduce your monthly mortgage repayments.
Please note that when you remortgage and switch to another lender, it is important to consider all of the costs to make sure you are saving money - speak to an Endsleigh mortgage adviser for remortgage advice.
When you apply for a mortgage the rate you pay to the lender will depend upon the amount of your deposit and the property value. This is known as your loan to value. For example if your property is valued at £200,000 and you have a mortgage of £150,000 then your loan to value is 75%.
If, since you took out your mortgage, your property has increased in value or you have overpaid your mortgage and reduced how much you owe to the lender, then you may be able to remortgage to another lender and secure a better mortgage rate.
If you have loans, credit cards and other debts and there is equity in your property you may be tempted to remortgage and take out a larger mortgage to repay these debts.
In the current economy many lenders are averse to lending to you if you are looking to consolidate debt. If you do find a lender willing to lend to you, then it is important to note that by moving debts to your mortgage you will be paying interest on these debts for the duration of your mortgage and this could result in you paying much more in the long term.
Many people prefer to improve their current property rather than move house and incur moving costs in addtion to the stress of moving.
If you have equity in your property you can apply to a lender to remortgage to release equity to pay for a new kitchen or bathroom, an extension or other home improvements. The lender will usually ask you to provide full details of the improvements you are planning to make before they agree to lend and some may request plans and invoices to prove you have had the work done.
If your circumstances have changed since you took out your mortgage and you can now afford to overpay your mortgage each month or you want to reduce your mortgage by paying off lump sums then moving to another lender could be the best option. Some lenders offer Current Account or Offset mortgages that allow you offset your savings and the balance of your current account against your mortgage debt.