A Beginners' Guide to Remortgaging

Remortgaging has become an increasingly attractive option for homeowners in the past few years. The recent economic crisis has left a lot of people in a financial predicament, and they have sought money in places they would never had considered just a few years prior. Remortgaging is an extremely viable option, and it is useful to understand it.

What Is Remortgaging?

Firstly, you can only remortgage if you own a property and you already have a mortgage outstanding (a mortgage is a large loan secured against your home as collateral). Remortgaging is the process of transferring the debt from your current mortgage to a new one without actually moving home or purchasing another property, effectively paying off one loan with another. Some people may not even move to another lender.

Should I Remortgage?

Remortgaging will either save you money because you are transferring to a mortgage with better rates, or release a lump sum of money if your outstanding debt is worth less than your house. This can be very beneficial for people who are struggling to meet their repayments, but it can also act as a ‘consolidation’ loan by paying off short-term debts with high interest rates (such as credit cards) in exchange for a mortgage with lower interest rates.

Remortgaging was typically a cheap way of getting some extra cash, especially if you were on a fixed rate (set percentage increase of the loan’s value). However, the recent financial crisis has meant that many fixed rates have been getting more expensive; making this a less attractive option for those who only need a few thousand pounds. If you are looking to extend your mortgage by £10,000 or more, this remains an attractive option for you.

How Do I Remortgage?

You must understand your existing mortgage first. If you have ‘fixed-capped’ or ‘discount’ interest rates, you may be charged for remortgaging. Make sure there are no penalty repayment charges tied to your loan before you look into refinancing.

It is a good idea to weigh up the pros and cons of staying with the same lender. You are likely to go through the same costs as you did when you got your first mortgage (arrangement fees, valuation fees, solicitor’s fees etc), but if you stay with the same lender you might be able to avoid paying some of these. Look carefully at the deals that are on offer and seek financial help if you need it.

When you have found the right mortgage plan for you, enquire about it and set up a meeting. You may want to contact your solicitor to arrange the proceedings. The lender will want to value your house and contact the previous lender, so be prepared to wait.