There are many reasons why someone might want to remortgage their home; one of the most common is that a homeowner wants to take advantage of a better rate offered by a competitor. This is particularly common if a person’s existing mortgage was offered with an initial deal period and is about to revert to the mortgage lender’s standard variable rate, which may often be uncompetitive.
Other reasons can include the desire to consolidate debts, rather than continue with a number of smaller ones and also the desire to release equity. Some people look for remortgage deals when they want to move house, as this may often be easier than seeking to obtain a new loan on another property. However, mortgage lenders are still tentative during the economic recovery and homeowners should be realistic about how easy it is to get a remortgage.
Remortgaging is not simply something that happens when an introductory rate comes to an end, at which point it often makes sense to remortgage in order to achieve a reduction in the monthly outgoings.
For example, if interest rates plummet during the term of a fixed rate mortgage, a homeowner may look for remortgage deals to take advantage of the reduced interest rate. A move such as this makes excellent financial sense and can significantly cut the monthly outgoings for a household.
Anyone seeking to remortgage should be wary about the terms and conditions of their existing mortgage, as the contract may carry penalty clauses designed to discourage them from switching to a different lender.
It is often the case that mortgage companies will include a penalty clause to make it harder for their clients to remortgage and to ensure that they do not miss potential profits should a client decide to end their contract before term.
On top of this, there may be associated costs to set up a new mortgage with a new company. Both of these costs need to be factored in when considering the economic case for remortgaging.
Some people remortgage their home as a means of withdrawing equity from their property. This is a common practice that can fund home improvements or holidays, although the fact that the current climate sees slowing house prices and low interest rates makes this less common at the moment.
A wish to purchase expensive items is often another reason that people seek to remortgage and this is often seen as an economical way of financing a new car or similar item. Debt consolidation is often a good reason to seek to remortgage, particularly if the individual has a number of debts with a variety of lenders.
It can be hard to keep track of such debts and it is often the case that they involve credit cards or store cards, which both carry very high interest rates. It will almost certainly be in their best financial interest to consolidate such debts, in order to achieve a more reasonable rate of interest.
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