We no longer take out a mortgage and stick with it for the rest of our lives until the debt is paid off. Remortgaging is a big business these days, and taking a look at your options could help your finances in a big way. What are some reasons you might want to think about switching your mortgage?
- Get a better deal. Are you sure that your current mortgage is the best you can get? The market is very competitive, and mortgage companies are desperate to get new customers. Usually, they do this by giving people who switch mortgages to them special deals. Remortgaging could get you more than just a lower interest rate and lower monthly payments. Depending on the deal, you could also get cash back, free home insurance, or other valuable extras.
- Change the type of mortgage you have. People's lives change over time, so what might have been the best mortgage for you a few years ago might not be the best mortgage for you now. You might want to switch from an interest-only mortgage to one where you pay back the principal, or you might want to use some of the newer features of mortgages, like flexible payments or offsetting. A remortgage can give you the chance to get a better deal that fits your current situation.
- Debt consolidation: It's common knowledge that the average person has more debt than ever before. Easy access to relatively cheap credit makes it tempting to "live now and pay later," or spend money now and worry about paying it back later. Still, the money has to be paid back, and credit cards and other similar things aren't the best way to get long-term credit. If you get a remortgage big enough to cover your mortgage and other debts, it will make your finances easier because you'll only have to make one monthly payment, which will usually be less than what you're paying now.
- Lock in a low rate. Even with the recent rise, interest rates are at all-time lows. Many experts think that rates will start to go up again in the coming months and years, making mortgages more expensive. If you switch from a mortgage with a variable rate to one with a fixed rate for a few years, you can protect yourself from future interest rate hikes.
- Get money out of your home's equity. Since house prices have gone through the roof in the last ten years or so, many people are sitting on a lot of equity. This is the difference between how much their house is worth and how much they still owe on their mortgage. Taking out a remortgage that will pay off your current mortgage and give you some extra money is a good way to get at some of this hidden wealth. This will give you the money you need for home improvements, a vacation or wedding, or any other large expense. Refinancing is often a cheaper way to get the money than, say, taking out a personal loan.
Considering all of this, a remortgage might seem like the best way to reorganise your finances. It's important to remember, though, that remortgaging is not a decision to be made lightly, since you could put your home at risk if you do it wrong. If you're not sure what to do, it's important to talk to a qualified mortgage advisor.
