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To Re(mortgage) or Not to Re(mortgage)

  • 5 years ago

Once you’ve got your foot on the property ladder and even after you’ve climbed a rung or two, you can feel trapped in your deal and in your property. It may be the case that you up and move, or you may decide to stay put and improve if you can’t quite afford the moving fees or you have an appreciation target. It may be time to think about remortgaging.

You can save money by remortgaging

When you remortgage, you’re taking out a new mortgage deal on a property that you already own, be it your primary residence or a holiday home. You can replace your existing deal with a slightly cheaper one, or you can borrow more money against it to pay for some serious home improvements. If these improvements increase the value of your home, then it’s an investment.

Around a third of mortgage deals in the UK are remortgages and while many people remortgage routinely when they reach the end of their existing deal, it’s also possible to look for and secure a new deal beforehand. You need a good reason, though.

Remortgaging to take advantage of an increase in value

If you find that your property value has increased due to home improvements or because the average value in your area has increased, then it’s often a good idea to look for a new deal. If your home is worth more, you’ll have a better loan-to-value ratio, which usually means lower interest rates. This, in turn, can mean some big savings over the next few years.

Remortgaging because your circumstances have changed

When you consider that the average mortgage in the UK is around 20 years long, it’s no surprise that homeowners’ life situations and circumstances change. People have babies, get promoted, receive inheritances, the kids grow up and go to college. All of these things mean that you might want to upsize or downsize, to pay more each month or even to pay a large chunk of your mortgage off.

You may not be able to do any of these things with your current deal without being penalised. Some mortgage deals only allow small overpayments, while some don’t allow mortgage holidays except for very serious circumstances. If you’re looking for an easier-going, more flexible deal, then remortgaging might be your best solution.

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