Reasons for Remortgaging
June 1st, 2007 | by admin |Remortgaging is an opportunity to both save money and, if necessary, raise capital against the value of your house.
Remortgaging for Equity withdrawal.
If you bought a house with a £130,000 mortgage and the value increased from £150,000 to £210,000, the bank is likely to agree to lend a bigger mortgage.
Assuming your income is sufficiently high, they may increase the size of your mortgage from say £130,000 to £170,000. This means you have an extra £40,000 to spend or pay off other debts. It means that your monthly payments will increase. Also, over the course of your mortgage term, you will pay extra interest payments on the higher debt. Therefore, there should be a clear purpose to remortgaging. One of the best uses of remortgaging is to pay off other debts, which have higher interest payments. For example, if you have credit cards the APR can be as high as 17% (on store cards it can be even higher). If this debt can be consolidated into your mortgage, the debt payments are likely to fall significantly.
Remortgaging to save monthly payments.
The mortgage industry is set up to reward those who actively seek to change their mortgage plans. Lenders usually seek to benefit from homeowner apathy. Basically, there are upto half a million home owners who stay on their banks APR, when they could easily switch to a lower rate. Banks and building societies offer a variety of rates. The most attractive rates, such as a discounted tracker mortgage are aimed at new clients and or those seeking to remortgage. The introductory rates usually run for a couple of years; at the end of this term your mortgage plan usually reverts to the higher standard variable rate. Therefore, whenever these introductory periods end (and you are free to move without any early penalty charges) you should be ready to switch your mortgage to a new introductory rate.