Remortgaging occurs when the terms set for the original mortgage have been negotiated. Most people re-mortgage to be able to get a better interest rate deal as compared to the one they presently have. For others, they re-mortgage when the current mortgage is about to end such as in short term tracker mortgages or short-term fixed rate mortgages. Given these instances, and with the markets currently in flux, many people are still not sure whether re-mortgaging is worth it?
We all have different reasons when we decide to re-mortgage. One of the best reasons would be to re-mortgage in order to raise funds you can use to pay for home improvements. This can be very useful if you are planning to do these renovations to increase the re-sale value of your home; that is, if you’re planning to sell it in the near future.
Re-mortgaging can also be a worthwhile option if you will use the money to pay off your other debts. This way, you can avoid the hassle of thinking about your widely distributed debt obligations when you can just focus on a single one. It is even better if the interest rates of the re-mortgage are much lower than the interest rates you are paying on your other credit.
Re-Mortgaging Advantages & Disadvantages
The advantages are as follows:
- You can save money on the unsecured interest fees.
- You can now consolidate unsecured debts to one monthly payment plan you can afford.
- You get to free up cash you can still use for other investments.
The disadvantages are:
- If your mortgage is to be paid over a longer time, the overall cost of the mortgage will increase.
- Failure to meet repayment would prompt lenders to take court action and put your home at risk of repossession.
- If the home gets repossessed, the lender will sell it at auction. If the house doesn’t sell it on for the same amount it is mortgaged for, it can lead to ‘mortgage shortfall’. This means, you are still indebted to the mortgage facility.
- Arrears with other companies may subject you to higher interest rates when applying for a re-mortgage.
- Re-mortgaging also means higher administration fees, valuation fees, broker fees, lenders fees and legal fees.
- There are re-mortgages that come with early pay off penalties. Try and avoid these.
- Re-mortgaging usually takes four weeks.
Alex is a freelance journalist and financial blogger. He loves to write about football and jazz but spends most of his days writing about mortgages, credit cards and payday loans. Image by TheTruthAbout
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