There are a number of reasons why you would want to consider remortgaging your house. These reasons include:
Your current mortgage deal is coming to an end - Normally the best rates are those that are fixed for 2,3 or 5 years. When these agreements come to end, the rate usually increases to the lender’s standard variable rate, and thus monthly payments are increased. By remortgaging, homeowners can ensure that they pay less towards a mortgage each month.
More than one property is owned - As a mortgage is repaid, over time you will build up the level of 'equity' you own in the property.
For example, if you invested 20% of the value as your deposit when you initially bought the property, you owned 20% of it outright. Over time, through the paying of the mortgage and your property’s value increasing, you may now own 35% outright. This figure is important when the time comes to remortgage, as you will be borrowing at a lower loan-to-value (LTV). When you bought, you will have used an 80% LTV mortgage, but now you would only need to borrow 65%.
Lenders normally offer better rates as the LTV decreases due to the image that the loan is less risky - which usually means reduced monthly repayments.
You simply want a new deal - If at the beginning of your agreement you envisaged that the agreement would suit your needs for the next 2 - 5 years, but it becomes apparent that this is not the case. Reasons people want to change may include that you can get a better deal elsewhere and increased flexibility to overpay or utilise repayment holidays.
You need to borrow more - a remortgage can be a quick way to secure some cash you’ve built up, if and when needed. This will increase your debt, so careful consideration should be made when taking this route.
To beat a rate hike
- This reason will mainly apply to those NOT on a fixed rate. A mortgage rate and any Bank of England base rates
are usually linked closely by lenders. If an increase is announced by the BoE, lenders Could increase the cost of monthly repayments, so homeowners may want to beat these increases to something that give more certainty in the months following.