Re-mortgaging has become very popular in recent years. Competition from Lenders has increased, leading to a wide range of competitive UK re-mortgage products.
You will notice that a number of the best re-mortgage products offer a free legal service and even a free valuation on your property. This means you can now transfer mortgage with no cost.
A remortgage is when the terms of the original mortgage are renegotiated, and usually means that the borrower increases the amount that they are borrowing, which is often possible due to a rise in the value of the property. A remortgage may allow the homeowner to repay other debts such as personal loans or credit cards, or it may be a way of paying for home improvements such as a conservatory a loft conversion. Remortgaging may also involve getting a better deal from your current lender, or it may mean changing lenders if a rival is offering a more competitive rate. The remortgage usually will involve a fresh survey of the property taking place, and an updated valuation of the property, which will take into account any changes in value due to home improvements, or due to fluctuations in the local or national property market.
Example of a Remortgage
Three years ago, you bought a house for £100,000, with a £10,000 deposit (10%). You took out an interest-only mortgage of £90,000 to cover the balance.Since moving in, you have made significant improvements to the property. You live in a desirable area, and the house has now been he re-valued at £150,000. Although you have been able to pay cash for many of the home improvements, you have recently run up £10,000 of credit card debts, and also have a car finance loan commitment for £10,000.As your mortgage is interest only, you would still owe £90,000 to your lender. Your equity in the house is £150,000 minus the £90,000 you owe to your lender, leaving you with £60,000.
If you take out a new mortgage for £120,000; £90,000 of this will be used to repay the previous loan, leaving you with £30,000. This can pay back your £20,000 debts, and leave you with £10,000 to spend on more home improvements, or in any other way you choose. You started by owing 90% of the value of your property, and you now only owe 80%.
