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The actual definition of a remortgage is when a second mortgage is taken out in order to pay off the first mortgage. Usually this will involve the process of transferring the mortgage from your existing lender to a new one, you will not be left with two mortgages to pay as the new lender will pay off the old mortgage and this will leave you with your new mortgage with the new provider. If you were just refinancing your house then this would not constitute a remortgage, usually this is done when you are staying with your current provider. There are many reasons why a borrower would want to have a remortgage on their property; the usual reasons for doing so are usually financial ones. Many people will look to remortgage to save money. Some of the most common ones include raising capital; this could be for any number of reasons, this can include the raising of capital for a major new purchase such as a car, consolidation of existing debts or maybe to enhance the value of the property with home improvements such as new kitchens, extensions or carpets.
When and How to Remortgage
A remortgage is most common when the markets are increasing and property prices are on the rise, people have what is known as equity within their property. Equity is the trapped capital growth of the property, for example if you bought your property for £100,000 and over the next 5 years the value increased to £125,000 then the equity within the property is £25,000. When the borrower takes out a remortgage of a property they can release the equity to gain access to the money, when this is done the monthly repayments will increase to reflect the new mortgage. From the example mentioned earlier if your house is now worth £125,000 and you have £25,000 of equity that you release and your existing mortgage is £40,000 then your new mortgage would be £65,000 and your new monthly repayment will be calculated on that basis. Often this is a cheaper alternative to financing projects than if you were to take out a personal loan or some other form of financial agreement.
There are many ways to remortgage your property and you do not have to release any equity to remortgage, many people will remortgage to simply get a better deal than they are receiving with their current mortgage provider. It is possible to save hundreds, if not thousands of pounds just by switching. If you are considering a remortgage then the first step you need to take is to get the current market value of your property, the house prices over the last few years have increased dramatically and your property could be worth more than you realise. You can get a rough guideline of the property prices from information provided online, but a registered surveyor would be the best option. The surveyor will be able to give you an accurate guide to how much your property is worth in the current market conditions.
Research different Mortgages
Once you have gathered the information on how much your property is worth the next consideration is to carefully research the market along with the mortgage rate and asses which mortgage will best suite your requirements. When you compare the mortgages be careful to ensure that the value of your mortgage reflects how much you have left to pay off and not the original value of the property. It could be possible that your current lender may have a better mortgage or will work on a remortgage with you; if this is the case then you will want to consider them as a viable option. There are many different types of mortgage available and they all have varying mortgage rates, and the main remortgage options you have include fixed rate, capped, discount, variable, base rate tracker and one account. Depending on your circumstances, how long you have left on your mortgage and the reasons why you are remortgaging will influence which ones will best suite you.
If you have bad credit ratings or any forms of defaults against you it is still possible to remortgage your property. Just doing very quick searches across the internet will provide lists of lenders that are prepared to offer remortgage options to people with a few black marks on their credit records. One major point to take into consideration when remortgaging under these circumstances is that you are more likely to pay a higher mortgage interest rate due to the increased level of risk the lender is taking. Also, if you think that you are likely to get rejected for your remortgage then it is best not to apply, any rejected credit case will show up on your records and prevent any future credit being gained.
How a remortgage calculator can help you
In order to give you a good idea on what different types of remortgage will help you and which may be the best options to take it is possible to use a mortgage calculator. The mortgage calculator can be found online and will provide you with lots of useful information from many different lenders. They simple require the following information in order to get started; first you need to input the value of the property that you are remortgaging, followed by how much you have left on your existing mortgage. Then you need to provide information on any redemption penalties that you may have for ending your current mortgage, these can be a hidden cost that many people forget and can vary considerably between lenders. Next you need to check current mortgage rates and select which type of mortgages you are interested in and which lenders you would like to consider. There are other costs that you can include to make the results more accurate as well as the above and these include, adding in legal costs, valuation fees and for how many years you want to take out the mortgage. Once all of the information has been submitted then you can get the results emailed directly to your inbox giving you a good idea of what options there are open to you.
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