Remortgaging is passing your mortgage to another lender by paying off the remaining balance of the first with the proceeds of the second. A common misconception about remortgaging is taking out a second mortgage on the same property with the same lender.
You have made a partial payment on your first mortgage, but you still have an outstanding debt. Instead of looking for another product with the same lender, you opt to look at the interest rates provided by other companies. This switch is remortgaging. You can remortgage your home by transferring it, but before you consider other lenders, consider the pros and cons:
Pros of remortgaging your home
The main pro of remortgaging boils down to money. By making the switch you can reduce your monthly repayments, which means you have more cash on hand. You can also reduce your monthly payments by looking for a contract that stretches for an extended period. You can reduce your mortgage term by finding a cheaper deal but maintaining the balance of your previous payments. Many options can accommodate your new financial situation. If you are seeking fewer monthly payments or less time in debt – remortgaging allows you to achieve all of that.
Even if you are not in a financial bind, sometimes a more competitive contract comes along. You do not want to be stuck paying a mortgage that does not correctly reflect the value of the home or paying interest that is overbearing. You can consult companies like mortgage-wise.co.uk for an initial quote to check if they have a better offer.
Cons of remortgaging your home
The disadvantage of remortgaging is that the switch is not always straightforward. You need to pay attention to the fine print especially regarding the early redemption charge (ERC) and the exit fee which covers all the payments on the paperwork done on your behalf. These fees add up and become very expensive. If you do not have a lot of cash on hand, remortgaging might become a liability. Considering that the benefit of remortgaging is about making money back, the fees might deter you.
The fees do not end with your first lender, even after you make the switch there might be added costs that come into play. The additional charges that you realise after you switch over might be the reason why the initial offer looked so appealing. The fine print goes both ways.
When making the most out of remortgaging your property, go through your contract with a fine-toothed comb to check if you can make the switch. If it is too expensive, you might find competitive offers with the same lender. Do not be afraid to ask around especially when you are in a bind. The constant reminder is if you do not make your payments your house will be repossessed. Remortgaging is an appealing offer for the most part for those who can cut corners, sometimes it becomes a necessity to keep the home.