How does Remortgaging work?

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What is Remortgaging?

A remortgage is when you are looking to move from one mortgage deal to another, whether that is with your existing lender or a new one. 

A mortgage is one of the largest financial commitments that you will take out, lasting you many years, however you do not necessarily have to stay in the same mortgage, especially when your financial situation may change over the years. 

Big changes can happen throughout your life, whether they are planned or unexpected and this can mean that your current mortgage no longer suits your needs. Whether your family is growing, your income changes or you are looking to add to your savings, remortgaging can give you the opportunity to find another mortgage that better fits your needs.

If you are in two minds about whether or not to remortgage, there are a few reasons why it may be worth doing so:

 

    • You want a better rate than you are currently on

    • You want to borrow more money

    • Take advantage of lower interest rates

    • You want to be able to make overpayments

Things to consider when applying for a Remortgage

What does it cost to leave your current mortgage?

Depending on what your mortgage deal is at the moment, some mortgages include charges when you leave, such as an early repayment charge. It is important to check with your lender to find out if there are any fees that will have to be paid.

Why are you looking for a remortgage and what do you want from a remortgage?

Do you now have savings that you would like to offset against your mortgage amount? Are you on a fixed rate mortgage that has now expired? Or do you want to lower your monthly payments? Whatever reason, first think about what you need from your new mortgage and how this will affect your future needs.

What is your credit history and score?

When applying for a new mortgage, new lenders will check both your credit history and score. It is important that before you apply, you are in a position to look for a new mortgage.

What is your loan-to-value (LTV)?

The lower your LTV, the more mortgage deals that will be available to you. You can work out your LTV by dividing your outstanding mortgage balance by the current value of your property. 

If you have a healthy LTV, then lenders will be more willing to provide you with lower rate mortgages, and you would have more opportunity to release equity to help you pay for home improvements such as a loft conversion or extension.

How to figure out your LTV

For example: Your outstanding mortgage is £150,000 and your property is valued at £300,000

Divide 150,000 by 300,000 = 0.5

0.5 x 100 = 50

Your LTV will be 50%

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