What Does it Mean to Remortgage?

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How does remortgaging work? 

Is remortgaging a good idea? 

What are the benefits of a remortgage? 

Remortgage means to switch your mortgage from one lender to another, usually to get a better deal to save money.

Homeowners choose to remortgage to shop around other lenders for the best rate, make changes to their mortgage, or to remortgage to release capital for one reason or another.

A product transfer mortgage means to take a new deal direct with your existing lender without shopping around for the best rate.

A further advance mortgage means to take additional borrowing with your current lender without shopping around.  This is popular if you’re mid-way through a deal and require additional borrowing.  A secured loan mortgage is an alternative to a further advance should your application be declined.  

How does remortgaging work? 

Remortgaging works by a new bank taking over the loan on your property, whether this is residential, i.e. you live in it, or a buy to let investment.

This works by shopping around for the best remortgage deal, usually with the help of a mortgage broker, and then applying for a new loan with the best lender for you.

Getting a remortgage isn’t always about getting the cheapest interest rate for some applicants, if you are self-employed, have bad credit, have an unusual income pattern or make up, or something else out of the norm then remortgaging is about finding the best lender for your personal situation.

Also, for a remortgage to work effectively, any associated fees must be considered, these include any application fees, product, or valuation fees.  If you have a bigger mortgage, it might be worth paying a product fee to get a better rate, the opposite will apply for a small mortgage.

Your mortgage broker will be able to let you know what remortgage deal works the best for you quickly.  

Is remortgaging a good idea? 

Remortgaging is a good idea is you are wanting to shop around for the best deal to save money with a better interest rate.

It’s also a good idea at your remortgaging window to consider reducing your mortgage term or releasing your equity for debt consolidation or home improvements.

A remortgage for home improvements is a good idea if you are looking to increase the value of your property by adding a new room modernisation or having an extension.  In the long run, this will bring your mortgage payment down as you’ll have a better loan to value ration next time you come to remortgage.

A remortgage for debt consolidation is only a good idea for the right applicant, this area of lending is specialist, and you will need to consider your options carefully.  Securing currently unsecured debts to your home could put you in a worse position and there is the possibility of repossession.

Seeking trusted remortgage advice is recommended to ensure that you fully understand the pros and cons of remortgaging bespoke to your personal situation.  

What are the benefits of a remortgage? 

The 5 benefits of a remortgage are: 

1. Peace of mind knowing that you’re on the best deal. 

2. Improve your loan to value, if your property has increased in value then you may qualify for a better band loan to value deal.  For example, if you currently have a 95% loan to value mortgage deal, if your property has increased in value, you may qualify for a much better rate at 90% or 85% as the risk is lower for the lender.  

3. Having a chance to review your term, if you can afford to overpay then you can save yourself a lot of money over the term of your loan. 

4. Get access to any equity that you have built up, you may want to release some of this for home improvements for example.  

5. It’s chance to review any of your associated insurance policies to make sure these are still suitable for your needs.  

Written by
Malcolm Davidson
Managing Director of UK Moneyman Ltd.
MAQ & CeRER Qualified

27th March 2024

About the Author

Malcolm Davidson

Managing Director of UK Moneyman LTD

Malcolm is one of the UK’s most well-known and respected Mortgage Advisors. He is passionate about providing a 5* customer experience and he has also trained and mentored dozens of fellow Advisors in a career that is now in its third decade.

In addition to his day to day duties as Managing Director, Malcolm still gives out mortgage advice and feels lucky that his job is also very much his hobby.

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