You’ve probably heard friends and family members talk about remortgaging over the years, but you mightn’t be sure how it works. Remortgaging means taking out a new mortgage on your home, whether to replace the current mortgage or to borrow further money against the property. Here’s a quick guide to how remortgaging works and what advantages it offers.
Why People Remortgage
People often remortgage when their introductory deal on their current mortgage expires. This means they can get a better rate than that offered by their current mortgage. Others borrow in order to free up capital to spend on home improvements or other costs, such as to pay off debts. The decision to remortgage shouldn’t be taken lightly, as Money Saving Expert explains. The site provides a helpful rundown of all the pros and cons of remortgaging and outlines why it might benefit you in the right circumstances.
How Borrowing Against Equity Works
Your equity can increase in two ways: if your property increases in value over time, or if the value of your home remains the same but you pay off part of your mortgage using a repayment mortgage. Remortgaging involves taking out a new mortgage for more money than your current mortgage. While your monthly payments may increase, you will receive a lump sum of money you can spend how you like.
How Much Does Remortgaging Cost?
Before remortgaging, you should carefully weigh up all the costs to make sure it will work for you. You should compare your current mortgage repayments to your new payments to ensure you can comfortably cover them. You should also consider how much you will pay back over the lifetime of the mortgage. You might also be subject to an early repayment fee, which is charged when you pay off your current mortgage early. This will usually be added on to your remortgage total. You’ll also need legal work when remortgaging, much as you would if you were purchasing a new property. Take into account conveyancing fees and similar costs; https://www.samconveyancing.co.uk/news/conveyancing/conveyancing-costs-explained-3366 provides a helpful breakdown.
How Much Can You Remortgage For?
The amount you can remortgage for will depend on some or all of the following:
– The value of your property
– Your credit rating
– Your employment details
– How much equity remains in the property