Reasons for remortgaging
Getting a better rate:
Typical reasons for remortgaging tend to be to get a better rate (especially if your initial deal period is over and you are about to revert to an uncompetitive standard variable rate), to consolidate debt or to release equity.
You may also have to remortgage if you want to move house. In such a situation, even if your lender will allow you to transfer your homeloan in theory, it will probably require a valuation of the property to ensure it meets its standards.
Remortgaging needn't only occur when your mortgage term comes to an end. Some people take out a new mortgage simply to save money on their monthly repayments. For example, you may take out a fixed rate mortgage only for interest rates to plummet, leaving you stranded on a higher rate. Remortgaging to a more competitive rate in these circumstances may make financial sense. Bear in mind that remortgaging is not a cost-free process though. Your current mortgage may carry penalties or charges if you try to leave it early, plus there will probably be costs associated with the new deal, so factor all of this into your decision.
In the past, remortgages were popular as homeowners sought to withdraw equity from their properties to fund the likes of home improvements or holidays. In the current economic climate with slowing house prices and higher interest rates, this is not such a common occurrence and a remortgage should really be driven by need rather than luxury.
The sub-prime remortgage
If you have an impaired credit record (you may have previously been declared bankrupt or received a County Court Judgement) and are looking to obtain a mortgage, you will probably be offered a sub-prime mortgage. This is likely to be at a higher interest rate than a mainstream mortgage as you represent a higher risk to the lender. But the intention of sub-prime mortgages is rehabilitation. If you successfully make your monthly mortgage repayments, when you come to remortgage it will make it more likely that you will be able to access a standard mortgage deal.
At the moment, many lenders have pulled out of the sub-prime mortgage market. This could make it difficult, or perhaps even impossible, for you to remortgage.
