Remortgaging: What is it and who should consider it?

Remortgaging, also known as refinancing, is the process of switching your current mortgage to a new lender or renegotiating the terms of your existing mortgage. Essentially, remortgaging allows you to pay off your current mortgage and replace it with a new one that offers better rates, terms, and conditions.

When can you remortgage?

Remortgaging can be done at any point in your mortgage term. However, it is often done when a fixed-rate mortgage term ends or the interest rate on your adjustable mortgage reverts to a higher rate, or when you want to borrow more money against your property. Additionally, remortgaging can be done to consolidate debt, lower monthly payments, or shorten the mortgage term.

Who should consider remortgaging?

Remortgaging may be beneficial to individuals who want to:

• Save money on monthly mortgage payments by switching to a lower-interest-rate mortgage
• Borrow additional funds for home improvements or debt consolidation from the equity in their home
• Shorten the mortgage term by switching to a mortgage with a shorter term and possibly a lower interest rate
• Avoid paying penalties by switching from a mortgage with a high early repayment charge

How to remortgage?

The process of remortgaging involves several steps, including:

1. Talk to a mortgage broker: Before you decide to remortgage, it is important to shop around and compare the different mortgage deals offered by lenders. A mortgage broker is able to take your information and shop a multitude of lenders to ensure you have the best rate.
2. Choose a mortgage: Once you have compared different mortgages, you should choose the one that best suits your needs and requirements. This involves considering factors such as interest rates, mortgage term, fees, and conditions.
3. Apply for the mortgage: After you have chosen a mortgage, you will need to apply for it. This involves providing your lender with information about your income, employment status, credit history, and other financial details.
4. Appraisal and Underwriting: Your lender will carry out a valuation of your property to determine its current value. In some cases, you can remortgage with an appraisal waiver. Additionally, the remortgage will go through underwriting.
5. Mortgage offer: Once your lender is satisfied with the appraisal and the loan has cleared underwriting, they will make you a mortgage offer. You will need to review the terms and conditions of the offer and accept it if you are satisfied.
6. Completion: Finally, your solicitor will transfer the funds to your previous lender to pay off your old mortgage, and your new mortgage will come into effect.

Pros and Cons of remortgaging

Remortgaging can have both advantages and disadvantages. Some of the advantages include:

1. Saving money: Switching to a lower interest rate mortgage can save you money on monthly mortgage payments and overall interest charges.
2. Access to additional funds: Remortgaging can provide access to additional funds that can be used for home improvements or debt consolidation.
3. Shortening the mortgage term: Switching to a shorter mortgage term can help you pay off your mortgage sooner and save on overall interest charges.
4. Flexibility: Remortgaging can provide greater flexibility by allowing you to choose a mortgage that best suits your needs and requirements.

Some of the disadvantages of remortgaging include:

1. Fees: Remortgaging can involve fees such as legal fees, valuation fees, and early repayment charges. You’ll need to find your breakeven point and ensure you will be at the house longer.
2. Credit score: Applying for a new mortgage can affect your credit score, though if you’re working with a mortgage broker, your credit is only ran once and the effect will be nominal.
3. Equity: Remortgaging can reduce the equity in your property, particularly if you borrow additional funds.

Not sure if a remortgage is right for you?

Remortgaging can be a useful tool for homeowners who want to save money on monthly payments, access additional funds, or shorten their mortgage term. However, it is important to weigh the pros and cons and seek advice from a professional before making a decision.

If you are considering remortgaging in Kansas, give us a call at JR Mortgage Group to help you find the best mortgage deal for your needs.