When Is Remortgage a Good Idea?


Over the past years, numerous people have been affected by the uncertain economic environment. This has made some of them be more cautious with their expenses and make smarter financial decisions. Remortgage is the best solution for property owners who qualify for a better deal; thanks to such a loan they can reduce their monthly payments and save money in the long run.

What Are the Pros of Remortagaging?

Before they decide to jump in into a new loan, borrowers should have a clear idea of their current financial situation. Also, they should weigh the advantages and disadvantages that such a decision can bring. Remortgage is a huge financial decision, one that will impact your lifestyle in the long run.

Refinance is a wise decision for those who can obtain a cheaper deal and thus save money. The money you obtain from such a loan can be used for different purposes such as home improvements, paying off other debts with higher interest rate, and so on. Provided they meet the eligibility criteria of the lender, borrowers can lower or increase their mortgage terms.

The advantages of remortgaging vary from one person to another, but the most common ones are:

  • Lower interest rates

  • Lower payments each month

  • A shorter payoff period

  • The ability to use your equity for other purposes.

According to an interesting article in The Times,  “Another advantage of remortgaging is that you can also ask to borrow more money to carry out home improvements or pay off more expensive debts like credit cards. Do consider that in the long-term you could end up paying more back in interest. “

Some people decide to refinance because they can barely deal with their monthly payments.

How to Prepare for a Remortgage?

How to Prepare for a Remortgage?

Many people fail to understand that they should prepare before they apply for a refinance. Getting the desired mortgage is not easy, but there are things that can be done to increase the chances of obtaining the loan:

  • Get a copy of the credit report- borrowers need to have a clear idea of their credit score, as this aspect is important to all lenders. Credit reports show lenders how responsible you are when it comes to managing debts. Such reports include credit history for the past six years including payments of loans, utility bills, mobile phone contracts.

  • Reduce the amount of the current debts- individuals who consider a refinance loan should do their best to reduce their balance before they apply for a new loan.

  • Close down credit cards that are no longer in use

  • Reduce unnecessary monthly expenses

  • Seek the professional advice of an experienced mortgage broker.

When to Apply for a New Loan?

According to an interesting article in CNBC, “When you refinance, it means you’re essentially taking out a brand new loan on your property, often for the remainder that you owe (but not always). Ideally, this new loan comes with better terms than your old one. This depends on a number factors, including how much equity you have in the house (i.e. how much of the loan you’ve already paid off) and what your credit score is when applying. “

It makes sense to remortgage for individuals who find themselves in one of the following situations:

  • Their current mortgage deal is almost at the end- borrowers who only have a few years left from their loan can obtain a better rate

  • They own a significant part of their property- property owners who have built up enough equity in their homes can apply for a refinance

  • The value of their house has increased over the years

  • Their LTV is lower and they are considered less of a risk by lenders.

  • They are interested in a better deal, which is cheaper, more flexible and meets their current financial situation

  • They need to borrow more money – they can release equity and use it for different purposes.

  • They want to pay their loan faster- some people do not have the option of early repayment with their current mortgage. If they find themselves in a better financial situation, it makes sense for them to find a better deal.

Why Seek Professional Advice when Refinancing?

Why Seek Professional Advice when Refinancing

Most borrowers do not have in-depth knowledge of mortgage jargon and they lack the time and patience to search for the best deal. Skilled brokers from ukmoneyman, on the other hand, search for competitive refinance loans for their customers all the time.

Remortgage is less stressful and less time-consuming for those who seek professional advice. Competent brokers will guide them every step of the way and:

  • Help them become familiar with the different types of loans available

  • Calculate the amount of money they can afford to borrow

  • Has access to better deals that are not available to everyone

  • Help them prepare for the application and ensure there are no mistakes

  • Help them save money overall by finding the most suitable loan

According to an interesting article in Unbiased, “Remember that every unsuccessful mortgage application may harm your chances of success next time around, as each refusal will appear on your credit record. Using a mortgage adviser will maximise your chances of being accepted first time. “

What to Consider when Remortgaging?

There are several aspects property owners should keep in mind before they go ahead with their remortgage application such as:

  • The amount they can afford to repay- do they earn enough each month to afford the new payments as well as other outgoings?

  • Their credit history- the credit history is an essential factor for lenders, one that impacts their decision of granting or rejecting the loan. Other aspects they will assess before making a decision are income, employment status, job security, and existing debts.

  • How much equity do they have?

Remortgage has a long-term impact on the finances and the overall quality of life of the borrower. Therefore, this is a decision that should not be taken lightly and property owners should know how it works and what to expect from it.