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Remortgage

Your mortgage interest rate seems too high? Although banks never lend money for free, there is a good chance that you can save some money. A good solution is to refinance your mortgage (to do remortgage). How does it work, how much does it cost and what do you need to know about it?

Re-mortgage is a process of taking out a new mortgage to replace the current one.
Re-mortgage is a process of taking out a new mortgage to replace the current one.

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What is a remortgage and how does it work?

Remortgaging is the process of taking out a new mortgage to pay off your current obligation. You can switch to another mortgage at any time, but in the vast majority of cases, this is something that is worth tackling after the fixed rate period has expired, for example after 2-5 years. This way, you can often skip the penalty for breaking your existing mortgage. The most common reasons for refinancing are:

  • to get lower interest rates
  • to raise capital for another property
  • to consolidate own debts
  • to cover the cost of a refurbishment

How much money will I gain if I change my mortgage?

By refinancing your mortgage, you can get clearly better repayment terms, for example in the form of a lower interest rate. To make you aware of the difference, let’s use an example. Of course, the values we have given are illustrative and your situation may be completely different, but it is worth seeing at least the theoretical savings:

Michael bought a house worth £250,000 with a 5% deposit. The bank offered him an overall interest rate (APRC) of 6.3% and, with a mortgage term of 25 years, Michael’s instalment was £1,574.06. After five years of repayment, Michael has £200,000 left to repay. By choosing to remortgage, he will be able to apply for a loan with an interest rate of up to 6.0%, bringing his instalment down to £1,432.86. In this situation, the saving is £140 a month!

You can find example interest rates on HSBC’s website, while a mortgage calculator can be found on Moneyhelper.

You can also do a remortgage if you need extra money. In the vast majority of cases, the value of the mortgage cannot exceed 95% of the mortgaged property (LTV rate). If you have been paying off your mortgage for a long time, for example for 10 years, you have probably already paid off a large part of the amount you borrowed and, in addition, the value of your home may have increased. You may find that you are able to borrow an extra few tens of thousands of pounds, which you could use, for example, to buy a new property for your child.

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Remortgage
Remortgage

Should I do a remortgage?

Remortgaging can improve your financial situation or allow you to raise additional funds. For this reason, it’s a good idea to check the mortgage offers available every 2-3 years and change the product you’re paying off if possible. Often you will find that you won’t need to change lenders because, as you repay the capital, you will qualify for a better offer at the same bank.

If you are wondering whether it will be worth doing a remortgage in your situation, your best option is to contact a mortgage broker, such as Extend Finance. In addition to the offers available online, there are many other more limited products available. As industry specialists, we can help you get more preferential terms and at the same time advise you on how to optimize your finances.

In a large proportion of cases, the remortgage pays off a few years after the property is purchased. If you’ve been repaying the loan for less than 24 months, you probably won’t save money by refinancing, although this can always be checked.

Summary

Are you unsatisfied with your current mortgage or looking for ways to reduce the installments you are now paying? Contact us and we’ll help you choose an option that suits your needs and requirements.

Do you have a question about mortgage refinancing (remortgage), want to take out a mortgage or insure your property? Contact us! Our mortgage advisors will be happy to answer all your questions and explain the details of the offer to you. The initial consultation is no obligation and free of charge. And if you would like to deepen your financial knowledge, be sure to read our blog posts:

Our team is here to assist you. Contact us by completing the form below.

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Think carefully about securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. Conveyancing services and some forms of Buy to Let mortgages are not regulated by the Financial Conduct Authority.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts
secured on it.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. Conveyancing services are not regulated by the Financial Conduct Authority.

Extend Finance nor The Right Mortgage Limited can’t provide advice regarding Personal Pensions, Pension planning or investment planning advice. You must seek independent financial advice from a suitably qualified professional financial adviser who may charge you for advice.

Wills, Will writing, Trusts and Trust planning are not regulated by the Financial Conduct Authority.

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