Borrowing Tips - Remortgages

Raising Cash
In recent years the low interest environment in the UK has made re-mortgages a popular way of raising money whilst saving money on your monthly outgoings by consolidating debts. With this type of lending interest is charged at the same rate as your mortgage. Therefore this type of borrowing is generally much cheaper than taking out a personal loan and can be an astute way to consolidate any debts into one solution. The cash lump-sum could even be used as a second deposit to help you on to the next rung of the property ladder.

Remortgaging also enables borrowers to release some of their house's capital. Capital can be raised against any portion of the mortgage that has been paid off, or against any increase in your property's value. With the rise in house prices in the UK in recent years many homes have built up significant equity.

You should bear in mind that there are costs involved in remortgaging which we are making you aware of but seek independent financial advice to make sure you are fully aware of the costs and implications for you.

Remortgage Costs

Mortgage Redemption Penalties
You may have a clause with your current mortgage provider that means you are tied to them for a limited period. To check this ask your lender for a mortgage redemption statement which will outline the outstanding balance on your mortgage, payments to date and any redemption penalties.

Remortgage Arrangement Fees
There can be additional fees that that are termed as application fees or arrangement fees which you need to factor into your costs when assessing the viability of remortgages. You should also factor in any valuation fees and legal fees.

Many mortgage providers will offer deals that offset the costs involved but their interest rate may be higher to cover this in the long run. Take professional advice from an independent advisor or broker to make sure you make a decision on sound financial advice

Weigh up your Options Carefully
Today remortgages are far more accessible and easy to arrange than ever before. Coupled to that there is a competitive market in the UK where providers are keen to get your business and will therefore make the process much easier for you.

The potential costs have been outlined above so you need to check the cost of these against any savings you may be making on interest rates or current debt repayments. Remember that your monthly payments may be lower than your current combined lending payments but you could end up paying more in the long run through consolidating debts into a mortgage.

Whatever you decide make sure you consult a mortgage broker or an independent financial advisor.

The opinions expressed are those of the author only. The material is for general information only and does not constitute legal, financial or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation by an FSA authorised company where the market is FSA regulated.

Think carefull before securing other debts against your home. Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.