The Benefits of Remortgaging Your Home
The Benefits of Remortgaging Your Home
The Benefits of Remortgaging: How It Can Save You Money and Provide Financial Flexibility
Britain has become a nation of homeowners, yet a significant number of UK homeowners are still tied to standard variable rate mortgages, unaware of the potential savings they could be missing out on. If you're currently on a standard variable rate or nearing the end of a special rate deal, remortgaging might be a smart move to lower your monthly payments and explore other financial benefits.
Understanding Remortgaging
Remortgaging involves switching your existing mortgage to a new deal, either with your current lender or a different one. This can be done for various reasons, including obtaining a better interest rate, raising additional funds, or consolidating debts.
Saving Money with Lower Interest Rates
One of the primary reasons to remortgage is to take advantage of lower interest rates. If you are currently paying a high standard variable rate, switching to a fixed-rate mortgage or another lower-rate option can lead to significant monthly savings.
Example:
Existing Mortgage: £220,000 at a 6.5% standard variable rate
Monthly Payment: £1,191
New Remortgage Offer: £220,000 at a 4.49% two-year fixed rate
Monthly Payment: £823
Monthly Savings: £368
Total Savings Over Two Years: £8,800
By switching to a lower rate, you could significantly reduce your monthly outgoings and save thousands over the life of the mortgage.
Additional Benefits of Remortgaging
Paying Off Your Mortgage Early
No one wants to be tied down by a mortgage forever. By remortgaging to a lower interest rate while keeping the same monthly payment amount, you can potentially shorten the term of your mortgage. This means you could be debt-free sooner, freeing up funds for other desires such as vacations, new vehicles, or home improvements.
Considerations: Be aware of any early repayment charges or administration fees associated with your existing mortgage. These charges might affect the overall savings from remortgaging.
Raising Extra Money
Remortgaging can also be a practical way to access additional funds for home improvements, major purchases, or other financial needs. Often, a remortgage can offer better rates than personal loans, making it a cost-effective way to raise money.
Example: Upgrading your home might be more affordable than moving, and improvements can increase your property’s value, further benefiting your investment.
Consolidating Debts
If you have outstanding debts, such as credit cards or car loans, remortgaging can allow you to release equity from your home to pay off these debts. Mortgage rates are typically lower than personal loan rates, potentially saving you money on interest.
Considerations: Be cautious about consolidating unsecured debt into a secured mortgage. This moves the debt from being unsecured (with less risk to your home) to being secured against your property, which could be at risk if you fail to keep up with payments. Also, extending the term of your mortgage could increase the overall amount of interest paid over time.
Conclusion
Remortgaging offers numerous advantages, from reducing your monthly payments to providing financial flexibility for home improvements or debt consolidation. However, it’s essential to carefully weigh the benefits against potential costs, such as early repayment charges and administrative fees. Consulting with a mortgage advisor can help you navigate the options and find the best deal tailored to your financial situation.
Whether you're looking to save money, pay off your mortgage early, or access extra funds, remortgaging can be a powerful tool in achieving your financial goals.
