Low interest rates, coupled with increased competition
in the UK mortgage market over recent years means that there
has never been a better time to review your existing mortgage
arrangements.
To put it simply, there is a good chance you could save
money by remortgaging.
What is a remortgage?
Remortgaging means switching to a different mortgage deal.
This could be with your existing mortgage lender, but more
often than not it will be with a different bank or building
society.
In times gone by, many people never bothered to remortgage,
but it looks like that situation has begun to change in
the past couple of years.
According to the Council of Mortgage Lenders, in January
2003 (for the first time ever) remortgages accounted for
more than 50% of the total monies advanced by mortgage lenders.
Save money
One of the most common reasons for remortgaging is to reduce
costs. By switching to a lower interest rate you can either
benefit from lower monthly repayments, or keep the monthly
repayments the same, thus repaying the loan quicker and
reducing the overall term of the mortgage.
Raising equity
Another reason to remortgage is in order to raise additional
cash.
Due to the rapid rise in UK property values over the past
few years, many people now have mortgages which are well
below their home's current value. The difference between
the property value and the mortgage debt is known as equity.
The majority of mortgage lenders will allow you to increase
the size of the mortgage in order to tap into some of this
equity. The cash
raised can be used for a variety of purposes, such as home
improvements, holidays, a new car, or the consolidation
of existing debts.
In the current market, it is not uncommon for someone to
be able to raise an additional £20,000 against their
property and still save money on their monthly repayments.
No move, no hassle
Unlike moving house, arranging a remortgage can be surprisingly
hassle-free. There are no chains of buyers to worry about,
so the whole process can often be completed in a few weeks.
Counting the costs
In terms of costs there is no stamp duty to be paid, as
you are not purchasing a property. Many lenders will pay
some or all of your valuation and legal fees.
In some cases there may be an arrangement fee or booking
fee from the new lender. There may also be redemption penalties
on your existing mortgage and you will need to take these
into account when assessing how much money you could save
by remortgaging.
Your mortgage is probably your biggest single financial
commitment, so it makes sense to spend some time ensuring
you always have the best possible deal.
A free no-obligation assessment of whether remortgaging
is right for you, can be obtained via various websites,
such as the UK Mortgages & Remortgages website.
About the Author
David Miles edits a number of finance websites, including
TheCashClinic.com
- a UK Personal Finance Portal.
