Being a homeowner is a huge responsibility. Dealing with things like mortgages, interest rates, and equity can be quite overwhelming. Recently, the concept of remortgaging your home has become popular with millennials and other young homeowners looking to free up some of the equity in their homes. But what’s it all about?
Taking out a mortgage is in itself a big deal, not to mention the quest for the best one. Many millennials are looking to get better rates or release funds so they can get on with those Insta-perfect home improvements. But remortgaging shouldn’t be a snap decision. It’s important to know what you’re doing and how to get the best deal.
In this article, we will take you through the most commonly asked questions about remortgaging your home that millennials have.
So, what is remortgaging?
Remortgaging is where a homeowner pays off their mortgage with money from another mortgage that has been taken out using the same home as security. The process does not usually involve moving houses or taking out another mortgage in conjunction with the first one.
In other words, those with an existing mortgage can switch to a new provider. This provider will pay off their old mortgage and release additional equity. The homeowner starts making payments to the new mortgage instead. Remortgaging is not to be confused with changing to a different product with the same provider.
Why should you consider it?
There are several reasons why you might consider remortgaging your property. One of the main reasons is that you can secure a more favorable interest rate from another lender. Usually, when a special deal (like a fixed rate) ends, it moves to a less fortunate standard variable rate. These are often higher and lead to customers shopping around for a better deal.
Additionally, remortgaging can be useful in reducing the cost of monthly payments, raising capital, or consolidating other short-term loans. Many homeowners consider remortgaging to use the extra cash to complete home improvements.
You should check that any remortgage deal you opt for will actually save you money before you sign on the dotted line. Homeowners should also be wary of accumulating further debt against their homes. There are risks if you don’t keep up with payments.
How do I know if I am eligible to remortgage?
Whether you are eligible for remortgage depends on your financial situation. Factors like how much you have borrowed and how consistently you pay your bills will be taken into consideration. If you want to borrow more on your existing mortgage, you need to prove that you can afford the monthly payments.
Lenders will typically look at your employment status, income, credit score, and what other liabilities you have. While lenders do allow remortgages with low credit scores, it usually comes with higher interest rates and less attractive terms.
Once the lender considers all these things, they’ll decide on whether they can approve the remortgage. They’ll also decide on how much equity they will allow you to free up as a part of the deal.
You may find you’re not eligible if you’re tied into an existing deal, your financial position has worsened considerably, or the value of your home has decreased. Your remortgage provider will look at the big picture when deciding whether you are eligible.
How do I go about it?
Don’t wait until the last second: look into your eligibility six months before your current deal ends. Check the fine print in your existing agreement, though, as some providers require you to pay an early repayment charge. This fee, along with administration and valuation fees, could mean your new deal isn’t as great as it looks at first.
Once you have decided the time is right to start looking around, you are ready to take your first steps. First, you need to enlist the help of a mortgage advisor to show you remortgage deals that could be a good fit. Trussle, for example, is a great way to research and compare remortgage deals.
Once you’ve decided on the right deal, you’ll need to provide documents that confirm your identity, property ownership, and income. The property will need to be valued by a surveyor appointed by your provider, and information on your circumstances will be required.
The process might seem daunting, but the advisor and provider will guide you simply and efficiently.
How long does remortgaging take?
It usually takes between four and eight weeks to remortgage a property, with the average being five weeks. This timeline is dependent on you providing the correct information when necessary. You may also need to provide additional documentation to support your application. Just remember to factor in the timescale before the end of your current deal.