Key To Mortgages | What is meant by the term re-mortgage & when would you do it?
Key To Mortgages -
Key To Mortgages – In the 20 something years I’ve been working and advising in financial services, the term Re-mortgage has and continues to cause confusion, with many people not fully aware of what it really means. So, the best place to start is by looking at what it’s not!
The biggest misconception is that to re-mortgage means to refinance your debt as you are in or expect to be in financial difficulty. This is not the case. We often hear the term re-mortgage when watching TV programs such as grand designs and other self-build style programs. We can associate re-mortgaging with re-financing to meet the cost of building work, which often appears to be spiraling out of control and therefore re-mortgaging is the only option to meet the build cost. This is often pictured as going cap I hand to the lender asking to be bailed out! It is also perceived that you re-mortgage when in financial difficulty and are struggling to or are unable to meet your current mortgage commitment. Whilst re-mortgaging can be used for this purpose, it’s rarely the case and leads many the associate the term re-mortgage with negativity. When in fact re-mortgaging for the right reasons can be the exact opposite and be incredibly positive.
I recently completed a re-mortgage for a client in Ringwood which saved them £308.00 per month, lowering their current mortgage payment from £572.00 per month to £264.00 per month. That’s a whopping 53% reduction on their monthly mortgage cost.
So, what is a re-mortgage? A re-mortgage is quite simply replacing your current mortgage with another, either with your current lender, often referred to as a rate swap or product transfer or changing to a new lender. Either way, the purpose is to obtain a more favorable mortgage deal than the one you currently have. The main aim being to reduce the overall cost of your borrowing, ensuring you have the best mortgage with the lowest cost possible. Think Car Insurance! We don’t think twice about shopping around for the best car insurance quote year on year, but many see doing the same for their mortgage as too complicated or challenging. Many just don’t know where to start or know that they are eligible to do so. For most people their mortgage is their biggest financial commitment and cost, therefore it stands to reason that this is where the most can be saved.
If you’ve not reviewed your current mortgage arrangements and options available to you, I strongly recommend you do so at your earliest convenience, you could be in a for a significant saving or it could allow you to start that project you’ve been putting off due to accessibility to funds.
As well as saving money, a remortgage can be used to fund bigger purchases or projects that would ordinarily be financially out of your reach or funded through more expensive ways of raising money. As your property increases in value and your mortgage reduces with the repayments made, the equity In your property increases. It may be possible to release some of this equity to fund your purchases or projects. The most common term for this is to re-mortgage and capital raise. The most common reason to capital raise is to complete improvements to your home. Such as an extension, conservatory, new kitchen, bathroom or to carry out essential repairs. However, I recently completed a re-mortgage for an existing client to obtain the best deal and lower their mortgage cost, whilst at the same time release some equity to buy a boat. A re-mortgage with equity release or capital raising can be used for almost any legal purpose but check that the purpose meets the lender’s policy before applying as your request may be declined.
Capital raising is often used to consolidate existing unsecured debt such as loans, hp agreements, and credit card balances. However, a much greater degree of care and consideration must be taken in cases such as these. As a mortgage is usually over a much longer-term that an unsecured loan or Hp agreement, you could end paying back more interest over the long term. It’s important to look at more than just the interest rate and you should consider the overall cost of repaying any debt.
The best time to re-mortgage or to explore your re-mortgage options is when you’re coming to the end of your current initial benefit period. Most people take a mortgage that has an initial benefit period, such as a fixed rate or tracking rate of interest for 2, 3 or 5 years. At the end of this initial period, you would usually revert to your lender’s higher standard variable rate. This is the time to explore your options. In fact, I would suggest you explore your options 3–4 months in advance of your benefit end date. This is to ensure your new deal is already set up to take effect immediately at the end of your benefit period, before reverting to a higher interest rate and increased cost.
Don’t rely on your lender to contact you at the end of your tie in / benefit period. At the end of the day the higher the rate you revert to the more money they make. Therefore, it’s not in their interest to make you aware of a better deal. If you are already on your lender’s standard variable rate or an alternative mortgage product that does not tie you to your current lender, then you can review your options immediately and make any changes that may benefit you. However, you should check your original paperwork or speak with your lender to find out if you would incur any penalties or charges for redeeming or changing your mortgage.
In summary, a re-mortgage is a positive action taken to reduce your cost, provide a more favorable mortgage to meet your current needs. It can be used to fund projects, purchases and debt management, but is more often a process and action to save money. Here at Key to mortgage, I offer a free, no-obligation review of your current mortgage arrangements, future needs and current options available to you.
You may have to pay and early repayment charge to your existing lender if you re-mortgage
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage
The biggest misconception is that to re-mortgage means to refinance your debt as you are in or expect to be in financial difficulty. This is not the case. We often hear the term re-mortgage when watching TV programs such as grand designs and other self-build style programs. We can associate re-mortgaging with re-financing to meet the cost of building work, which often appears to be spiraling out of control and therefore re-mortgaging is the only option to meet the build cost. This is often pictured as going cap I hand to the lender asking to be bailed out! It is also perceived that you re-mortgage when in financial difficulty and are struggling to or are unable to meet your current mortgage commitment. Whilst re-mortgaging can be used for this purpose, it’s rarely the case and leads many the associate the term re-mortgage with negativity. When in fact re-mortgaging for the right reasons can be the exact opposite and be incredibly positive.
I recently completed a re-mortgage for a client in Ringwood which saved them £308.00 per month, lowering their current mortgage payment from £572.00 per month to £264.00 per month. That’s a whopping 53% reduction on their monthly mortgage cost.
So, what is a re-mortgage? A re-mortgage is quite simply replacing your current mortgage with another, either with your current lender, often referred to as a rate swap or product transfer or changing to a new lender. Either way, the purpose is to obtain a more favorable mortgage deal than the one you currently have. The main aim being to reduce the overall cost of your borrowing, ensuring you have the best mortgage with the lowest cost possible. Think Car Insurance! We don’t think twice about shopping around for the best car insurance quote year on year, but many see doing the same for their mortgage as too complicated or challenging. Many just don’t know where to start or know that they are eligible to do so. For most people their mortgage is their biggest financial commitment and cost, therefore it stands to reason that this is where the most can be saved.
If you’ve not reviewed your current mortgage arrangements and options available to you, I strongly recommend you do so at your earliest convenience, you could be in a for a significant saving or it could allow you to start that project you’ve been putting off due to accessibility to funds.
As well as saving money, a remortgage can be used to fund bigger purchases or projects that would ordinarily be financially out of your reach or funded through more expensive ways of raising money. As your property increases in value and your mortgage reduces with the repayments made, the equity In your property increases. It may be possible to release some of this equity to fund your purchases or projects. The most common term for this is to re-mortgage and capital raise. The most common reason to capital raise is to complete improvements to your home. Such as an extension, conservatory, new kitchen, bathroom or to carry out essential repairs. However, I recently completed a re-mortgage for an existing client to obtain the best deal and lower their mortgage cost, whilst at the same time release some equity to buy a boat. A re-mortgage with equity release or capital raising can be used for almost any legal purpose but check that the purpose meets the lender’s policy before applying as your request may be declined.
Capital raising is often used to consolidate existing unsecured debt such as loans, hp agreements, and credit card balances. However, a much greater degree of care and consideration must be taken in cases such as these. As a mortgage is usually over a much longer-term that an unsecured loan or Hp agreement, you could end paying back more interest over the long term. It’s important to look at more than just the interest rate and you should consider the overall cost of repaying any debt.
The best time to re-mortgage or to explore your re-mortgage options is when you’re coming to the end of your current initial benefit period. Most people take a mortgage that has an initial benefit period, such as a fixed rate or tracking rate of interest for 2, 3 or 5 years. At the end of this initial period, you would usually revert to your lender’s higher standard variable rate. This is the time to explore your options. In fact, I would suggest you explore your options 3–4 months in advance of your benefit end date. This is to ensure your new deal is already set up to take effect immediately at the end of your benefit period, before reverting to a higher interest rate and increased cost.
Don’t rely on your lender to contact you at the end of your tie in / benefit period. At the end of the day the higher the rate you revert to the more money they make. Therefore, it’s not in their interest to make you aware of a better deal. If you are already on your lender’s standard variable rate or an alternative mortgage product that does not tie you to your current lender, then you can review your options immediately and make any changes that may benefit you. However, you should check your original paperwork or speak with your lender to find out if you would incur any penalties or charges for redeeming or changing your mortgage.
In summary, a re-mortgage is a positive action taken to reduce your cost, provide a more favorable mortgage to meet your current needs. It can be used to fund projects, purchases and debt management, but is more often a process and action to save money. Here at Key to mortgage, I offer a free, no-obligation review of your current mortgage arrangements, future needs and current options available to you.
You may have to pay and early repayment charge to your existing lender if you re-mortgage
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage
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