Going through the mortgage journey will prove to be beneficial. The process can come with its ups and downs, however, you will finish the process with one potential outcome when your term ends.
Getting a mortgage is a major financial commitment, for example, you’ll need to keep on top of your payments and know when your fixed-term is ending.
When it comes to the length of fixed-term mortgage, this varies depending on the product you take out. Generally, mortgages will come in 2-year, 3-year or 5-year fixed terms. You may find that you take out an even longer fixed term like 7 or 10 years, however, this is down to your circumstance.
If you are coming to the end of your fixed term, it will be time for you to take out a new product because your current one has ended. This is when a remortgage occurs.
In some instances, you may be able to remortgage early, however, this could result in you having to pay a bigger fee ( early repayment charge) because you are switching early.
What is a Remortgage?
Let’s begin with looking at what a Remortgage actually is. A Remortgage involves you taking out a new mortgage to pay off a mortgage that you already have. You may have a variety of options when taking out a Remortgage, some options being bigger than others.
When you take out another mortgage product to replace your current one, this is called a remortgage. You may know this is a product transfer, however, the big difference is that a remortgage is when you take out a product with a different lender and a product transfer involves you taking out a new product with your current lender.
This sounds pretty straightforward when you put it that way, however, it’s finding the right product that makes it challenging. There are a plethora of varying deals and rates on offer, which means you may need to do a lot of looking around so that you can find the most suitable deal for you.
There are a number of reasons why people choose to remortgage, you might want to find a better rate, improve your home or consolidate debts or something else.
Remortgage For Better Interest Rates
Usually, an average fixed mortgage term lasts between 2 and 5 years. Within this time, you will be paying off capital as well as interest. Therefore, 2-5 years later, you may find yourself in a lower loan-to-value bracket which allows you to access better rates.
With this in mind, this is why people choose to remortgage, as they risk falling onto their lender’s standard variable rate of interest (SVR). Tracker mortgages “follow” the Bank of England’s base rate. If interest rates fall, you’ll make lower payments to your lender.
If interest rates rise, your payments will increase. Along with this, lenders will put an additional percentage onto this base rate so you’re usually a rate between 2-4%. Tracker mortgage will work similarly to your lender’s SVR mortgages.
Remortgage For Home Improvements
You might feel that your current home could do with some improvements like a new extension or conversions. This might be an option if you decide to remortgage.
When you start the process, you will get an estimation of the costs of the improvements. As soon as you have an estimate of how much the work would cost, you might be able to incorporate these costs into your mortgage when you take out a new product. This could make your monthly payments increase it, however, you will be able to fund that extension or loft conversion.
This can be an easier option compared to going through the process of moving home in Coventry as this can be a stressful experience. Therefore, if you are looking to grow your family, want to add value to your home or just want to revamp your home, remortgage for home improvements might be the option for you.
Remortgage for Changes to Your Term
You might find that you want to extend or shorten your whole term in order to switch to a more flexible product.
In the event that you want to shorten your term, you will be able to pay off your mortgage a lot quicker. On the other hand, a shorter term can also result in higher repayments. If you decide to lengthen your term, this can lower your payments but does mean you will be paying off your mortgage for longer.
You usually decide if you want to extend your term or not when it comes to remortgage time. Choosing to shorten your term may also give you the option to overpay, which can help you pay off your mortgage quicker.
A flexible mortgage deal may sound appealing to you but, they do usually come in the form of a tracker mortgage. This type of mortgage is tracks the Bank of England’s base rate of interest, with this rate potentially fluctuating depending on the overall economic performance. Because of this, your payments may change each month. When the interest rates change, so do your payments.
Remortgage to Release Equity
If you have owned a property for a lengthy amount of time, it’s very likely there is a lot of equity within it. Equity is the difference between what is still owed on the mortgage and the current value of the property. You might find that you can remortgage and release some of the equity to turn it into a lump sum of cash.
This cash can be used for anything you want. This cash could go towards a deposit on another home, buy a new car or even pay for a wedding with it – it’s your choice!
Through our experience as a Mortgage Broker in Coventry, we find that Buy to Let landlords release equity in order to put forward a deposit onto another property which then expands their portfolio.
If you are aged 55+ and have a property valued around at least £70,000, it may be worth looking at your options for Equity Release in Coventry. Speak to an open & honest later life mortgage advisor to learn more about this.
Remortgage to Consolidate Debt
In the circumstance where you have built up some unsecured debt and are looking to incorporate this in to your mortgage, in some cases, this can be possible. We always advise you to speak with an expert Mortgage Advisor in Coventry because of the complexity that comes with debt consolidation.
The reason this option can be challenging is that it is not only based on how much you owe and your property value, your credit rating is also factored in. You need to regard the fact that you’re trying to incorporate large sums into your mortgage which means your total mortgage amount will increase.
Please don’t hesitate to contact us, if you are in need of a mortgage expert because you have bad credit. Here at Coventrymoneyman, we have debt consolidation experts that will be happy to help with your needs.
Experienced Mortgage Advisors in Coventry – Get in Touch
When you are coming towards the end of your fixed mortgage term, you might want to start looking at your remortgage options. It’s best to begin looking around 6 months before your deal ends, it may be time to begin looking around for deals. Our team can help take as much stress away by helping you through the process.
Book a free remortgage appointment online today. Within this appointment, you can speak to one of our knowledgable advisors who are here 7 days a week to provide open and honest Remortgage Advice in Coventry. Our goal is to provide help and support throughout the process and find you a suitable deal for your personal and financial circumstances.
Date Last Edited: December 6, 2023
