Advantages of Remortgaging
If like most people you are paying one of the large banks or building societies standard variable rates, you can probably cut your mortgage costs by unto a third.
For example on a £100,000 mortgage at a standard rate of 6.5% you will pay £542 a month. If you were able to switch to a home loan of 4.24% then you can save £189 a month, reducing bill to £353. Such deals in the UK were possible in 2006. A deal of 4.24% could be found from a variable rate with a discount of 0.5 % on the base rate. Such deals like this will constantly be changing. Often special mortgage deals are only available for a short period of time. If base interest rates change then they will also change. However a no fee broker or mortgage adviser will be able to find the best mortgage quote from scanning a variety of mortgage deals. To remortgage will invariable involve an arrangement fee £499 is a typical fee. When evaluating the costs and benefits of a remortgage it is important to consider this and any other fees. However if the mortgage is for a long time period the arrangement costs should work out to be a small % of the savings. If you are short of money you could even include the arrangement fee in the new mortgage.
In addition it is worth remembering the monthly savings have an additional tax advantage.
Remortgaging will definitely enable you to cut costs considerably and also is an ideal way to partake of equity withdrawal. Equity withdrawal is when you take money from the increased value of your house. For example if you buy a house for £100,000 with a 100% mortgage; after 10 years your house might have increased to £180,000. This represents an increase in your wealth equivalent to £80,000 however at the moment this is just a paper increase and is not any good unless you were willing to sell the house. As this is something most people don’t want to do what you can do is remortgage. Therefore you could go to a mortgage holder and ask to get a mortgage for £180,000. this means that they will lend you £180,000 but the house only cost £100,000 so you could spend £80,000 cash. However it is does mean that you will have higher monthly repayments.