Remortgaging is simply switching your current mortgage for another one, either with the same provider or a new one.
Doing this may be able to get you a better deal with a lower interest rate and smaller repayments. It can also be a good way to release any money available in your home to free up cash, especially if your home has risen in value.
For example, if you’ve paid off 50% of a mortgage on a home that you paid £200,000 for, but the property is now worth £300,000, your equity in the property is now worth £200,000.
If you’re dealing with a lot of unsecured debts and are able to remortgage, this could be a cheaper way to clear those debts. But it’s important to remember that your home is at risk of being taken if you can’t keep up repayments.
How does remortgaging work?
We advise that before you remortgage any home, that you do your research. Check with your provider if there are any new deals they can offer you, and shop around for others to find the best one for you.
You can also speak to a money advisor to see what other options are available to you. This can help you further down the line if you wish to complain to the Financial Ombudsman Service.
What fees are there when you remortgage?
Remortgaging your house isn’t free, but it doesn’t come cheap. It is a lengthy and complicated process, with lots of legal paperwork, meetings and valuations – all of which will cost you money.
You will be charged things such as an arrangement fee and solicitors fees for going through the process. Some companies will also charge you early exit fees for switching provider before the end of your contract.
It’s important to take any fees into account when you’re doing your research for a remortgage in order to work out how much you will either be costing yourself or saving yourself.
What documents do I need to remortgage?
If you decide that remortgaging is the route you want to go down, you’ll need to gather together certain documents to present to solicitors and the mortgage provider.
You’ll need a set of payslips and bank statements to help show how good you are with money and that you can be trusted with the large amount of money. If you’re self-employed, you’ll need a backlog of your accounts and tax returns to prove this.
If you earn commission or bonuses, details of this will need to also be provided to show all of the income you receive.
You’ll also need all the normal documents such as your ID and proof of address for legal purposes.
Is remortgaging a good idea?
As with all things money related, it needs to be thought about carefully before you do anything. There’s a fine line between managing to save yourself thousands and landing yourself in hot water, so it can be hard to know whether remortgaging is worth it in the long run or not.
Going through this process will stretch the debt you owe to the mortgage company out longer than you might like and in turn increase the overall cost. There are also sometimes limits on how much you can overpay, meaning you won’t be able to pay it off any quicker.
However, it’s often not worth the hassle it can cause as once your remaining debt drops below a certain threshold, the cost of your remortgage will likely be higher than any savings you could have. Some banks also will not accept a new mortgage for less than £25,000.
If you are considering remortgaging your property to help you pay other debts, we can offer free and impartial advice on the best way to do this. Contact us today and speak to one of our friendly advisers to help you find the best solution to your circumstances.
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