Reasons to remortgage

Popular reasons for remortgaging

1. Get a lower rate

One in five mortgage borrowers pays over the odds by staying on a lender’s Standard Variable Rate (SVR). This is usually around two per cent higher than the most competitive new deals available on the market. If your monthly repayment was £1,000 on a SVR of 7.5%, you could save almost £170 a month by remortgaging to a more competitive 5.5% deal.

2. Choose a more secure deal.

If you are on a variable rate and interest rates rise, you may want to consider remortgaging to a fixed rate. This anchors your monthly payments down at a set level, so you can rest assured you will not pay more when interest rates increase.

3. Make home improvements.

Extending a house, renovating a kitchen or bathroom or carrying out a loft conversion can add around £20,000 to the value of a property. Many mortgage lenders offer special rates to homeowners who want to remortgage to make home improvements, and some allow you to borrow more than usual for this purpose. If you are looking to improve the energy efficiency of your home, look out for ‘green’ lenders offering special discounted rates.

4. Find a flexible mortgage.

Flexible features, such as the ability to underpay, overpay and take payment holidays, can be very useful, especially if your income has gone up and you want to pay off your mortgage early, or you are taking a career break to look after your children, for example. Remortgaging to a flexible deal means you can pay off your mortgage in a manner that best suits your lifestyle.

5. Consolidate your debts.

If you have a lot of credit card and personal loan debt, you could potentially reduce your monthly payments by consolidating your debts into your mortgage. This is because the interest rate on a mortgage is often around 10% lower that the interest rate on a credit card. However, adding these debts to your mortgage may also cost you more over the longer term.

6. Finance a buy to let purchase.

If you believe there is money to be made in property investment, you could increase the size of your current mortgage and use the extra cash to put down a deposit on a buy to let venture. But don’t forget, becoming a landlord is a complex process and there are risks involved.

7. Help your kids onto the property ladder.

House prices in many parts of the UK have trebled over the past 10 years, leaving many young buyers today struggling to purchase their first home. By remortgaging, you can release equity from your home and help your family financially.

8. Raise some capital.

You may want to free up some cash to finance a one-off purchase, such as a car, or to buy a second home abroad. While this can be a viable option remember that, unlike a personal loan, with a mortgage you are putting your home at risk if you fail to meet the repayments, so don’t overstretch yourself.

9. Get a better service.

Nowadays, the mortgage market is very competitive. If your current lender isn’t keeping you happy or the service isn’t up to scratch, move on. Remember, banks aim to maximise their profits while building societies are more interested in providing the best service for their members.

10. Become a mainstream borrower.

If you were self-employed or had a bad credit history when you took out your current mortgage, you may have been put on a higher rate than a mainstream borrower. You could potentially bag a better deal and a cheaper rate by remortgaging. Why not speak to a mortgage broker who can assess your current needs and circumstances? Many do not charge a fee.