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by Molly Harris Molly Harris is a Mortgage Loan Officer
Opting for a remortgage can save you thousand pounds. But in order to avail of it off, make sure you know it’s in and out to get the best value on your deal.
Many people make use of the NatWest remortgage calculator to roughly know how much they are supposed to pay each month.
Many reasons are there to choose a remortgage in your life. In case you miss the trick somewhere, it can be your costliest mistake. Knowing all the pros and cons and weighing each one of them can be very beneficial for you, especially when you think of remortgaging.
This blog will tell you every single thing. You need to know before finalizing on any option.
WHAT IS REMORTGAGING? WHAT ARE THE PROS AND CONS OF THIS FINANCING OPTION?
Remortgaging is the process of replacing your ongoing home mortgage with a new one with a better loan term. Here you not only change your mortgage but also the lender who is providing it.
The reason why many people opt for remortgages with poor credit is:
1. Reducing monthly mortgage payments.
2. Lower the rate of interest charged.
3. Consolidating loans.
4. Changing the sort of current loan.
5. Current mortgage is coming to an end.
6. Your property’s value is increased.
7. You want to borrow money.
Before moving forward with this alternative, you need to know all the associated advantages and disadvantages that come with it.
PROS OF REMORTGAGING
1. Reduction in monthly repayments
Selecting a mortgage with a fixed or variable interest rate will substantially reduce the associated monthly repayments. You can also choose to minimize your current mortgage term and pay it more quickly.
2. Better financial control
You can control your money if you move your existing mortgage into a fixed interest rate. Suppose you will know that the mortgage repayments are going to be the same for some years. You can think of utilizing your money on other things or even save it.
A fixed interest rate of 2 to 3 years will offer peace of mind where you don’t need to worry about monthly payment fluctuations.
3. Borrow money
Suppose you want to arrange quick funds for a home remodelling or look after a sudden expense. Then remortgaging can help release a big amount of money while lowering the monthly repayment.
You should always check that the total cost of remortgaging is worth opting for. You need to check whether the remortgage deal is able to obtain a good amount of money or not.
4. Debt consolidation
If you have numerous debts coming from your credit cards or loans and you are struggling to manage each one of them. Then you can clear off all your debts with the help of remortgaging as it will release money for this purpose.
Opting for remortgaging to pay off debts should only be considered when you are dealing with an emergency. This is because the rate of interest charged on such short-term debts is comparatively higher.
5. Reduce the LTV
LTV stands for loan to value. It is a ratio of the total amount of your mortgage. It highly influences the rate of interest charged on it along with the other terms in the mortgage.
Your LTV gets reduced over some time during the increase of the value of your property. In such a scenario, you might qualify for an ideal interest rate and terms in the mortgage.
CONS OF REMORTGAGING
1. The eligibility criteria
When you opt for remortgaging with a different lender, then your application and you will be treated as a new borrower. You will go through the same credit checks and will be asked for vital documents, which you did when you were obtaining your current mortgage.
Suppose you have started a business or taken up a new job. Then you will have to produce all the evidence of your income and accounts statements to show the regular flow of revenue.
Your expenditures, promptness to pay the debt, amount of credit card bills, or other spending are gauged in the entire remortgaging process.
2. Financial stress
If you borrow money from remortgaging your house loan, then this will cause financial stress in your life. You need to shorten your expenditure to maintain a balance in your budget for each month.
As already told, if you borrow money to pay off or consolidate your debts, then the rate of interest over the mortgage term will be higher.
3. Cost involved
If you opt for a remortgage by approaching your current lender, then you will be charged a penalty for finishing the current term. This will also be done after meeting some requisites.
If you choose a new lender for remortgaging process, then the cost of property valuation, legal fees, and charges for arrangement will have to be incurred by you.
It is essential to identify that all these costs don’t put a burden on your head. When you look at the total remortgaging cost, then consider looking at it aggregately.
IN WHAT CIRc*msTANCES YOU SHOULD OPT FOR REMORTGAGING?
First, have a look at your current mortgage. You might opt for a better deal, but the market keeps fluctuating, offering new deals as well. Such offers can save you many pounds on the term.
You don’t need to change your lender if they provide you with a better remortgaging term. Always keep in check the fees included in the process. You should not end up paying more money for the entire process than staying in the current mortgage deal.
You can opt for remortgaging at any point in time. It is when you are not getting a discounted or fixed interest rate on your existing home mortgage.
But before switching, you need to make sure that you have checked all the cost that is associated with it. Many lenders often promise to provide free-cost deals, but it is the only way to tempt applicants.
The cost of legal, administration and valuation is inevitable. You need to pay all of these.
Many deals might look money-saving, but you can lose your money if you don’t check the requirements beforehand.
You should avoid making any deal with your existing lender without doing the necessary market research. Don’t aim to save your time. Focus on getting the best deal. Avoid ignoring the fees included in the process. Make sure you have totalled it to avoid any over payment.
TO CONCLUDE
Remortgaging is one of the great ways to minimize your monthly repayments. This option allows you to chunk out some money out of your house to purchase something big or clear off your existing debts.
The process of remortgaging comprises pros and cons. You need to weigh both before opting for it if you don’t want to end up losing your money.
The mortgage that you are paying currently is your most significant financial commitments. Therefore remortgaging it makes it an even more critical decision.
There are a lot of options given by different lenders. You need to research and compare each before picking your current lender. You might get to remortgage your current loan in the most lucrative term.
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About Molly Harris
Molly Harris is a Mortgage Loan Officer
3 connections, 0 recommendations, 29 honor points.
Joined APSense since, May 6th, 2019, From Manchester, United Kingdom.
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Created on Jun 23rd 2022 08:26. Viewed 133 times.
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