Remortgaging is when you take out a second or subsequent mortgage on a property you already own. You might do it to benefit from better interest rates or better terms, or to borrow more money against the value of your home.

Depending on the terms of your first mortgage, and how much more of it you have to pay off, you may or may not be financially better off by remortgaging. However, if the financial benefits outweigh any penalties you’ll have to pay (e.g. an early repayment fee), remortgaging might be the right solution for you.

Here’s our quick guide to the benefits of remortgaging:

1. Take advantage of a better rate

Some mortgages, e.g. fixed rate and tracker mortgages, change to a higher rate after a certain period, typically between two and five years. While your lender would have checked to make sure you could afford the rates even after they rose, that doesn’t mean you’re not feeling the effects when they happen!

Remortgaging can allow you to take out a new loan with lower monthly repayments, reducing your outgoings and making your home more affordable.

2. Change to a mortgage with terms that suit your current circumstances

The longer you’ve had your mortgage, the more likely it is that your circumstances have changed. Maybe you took out a mortgage with low monthly repayments, that would take you a long time to pay off. If you did that but now have a larger income, remortgaging might mean you could find a loan you could pay off more quickly, through making larger monthly repayments. Equally, if your mortgage has become harder for you to afford, remortgaging would allow you to change to repayments more in line with your current income.

3. Your home has increased in value

If your home has increased considerably in value since you took out your original mortgage, you could now be enjoying a lower rate of interest. This is because the amount you borrowed now represents a much smaller proportion of the value of the house than it did when you bought it – in mortgage-speak, you have reduced your loan-to-value. In the same way, you now own a much bigger proportion of the house than your original deposit once covered. Both these factors mean that you’re now a smaller risk to the lender than you originally were, so you could be rewarded with a lower rate of interest and lower monthly repayments.

4. You need to borrow more money

If you need to borrow money for, say, home improvements or to buy a new car, or you’d like to consolidate your loans, remortgaging can allow you to do it. You’ll take out a new mortgage to cover the remaining loan towards your house, and add the cost of the home improvements or car on top.

This can be an effective way of borrowing money as interest rates on mortgages are often lower than interest rates on bank loans, and considerably lower than interest rates on credit cards. However, you will spend longer paying off your remortgage, which is important to consider.

If you’re looking to save money on your monthly outgoings, remortgaging could be the solution. Yes Mortgage Services provide free, independent mortgage advice, looking for the best deal for you as well as calculating the savings. Get in touch today on 0800 612 5596 for a free, no-obligation consultation with our independent mortgage brokers – we’re looking forward to hearing from you.

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