What does it mean to remortgage your home? Can you save money and reduce your mortgage term by remortgaging?
Simply put, it's moving your mortgage from one lender to another and there are various reasons why someone may want to do this. Most people remortgage when they reach the end of a short term deal. A typical mortgage has a term of 25 years but you don't need to stay for the full term with your original mortgage provider, particularly if there are better deals available.
For most homeowners their biggest outgoing and cause of most money woes is their mortgage repayments, but by reducing your mortgage rate even by a tiny amount can save thousands of pounds per year, every year until it's all gone. This can be done by switching to a cheaper deal.
Alternatively through re-mortgaging you can reduce your mortgage payments by extending the term of your current mortgage, for example increasing a 25 year mortgage term to 30 years. However, this option will cost more in the long term due to accruing interest. On the other hand re-mortgaging to a different lender may allow you to reduce your mortgage term and allow you to pay it off sooner where you can be mortgage free!
Some people also remortgage their property to release some of their built up equity which can be used as finance such as to consolidate other debts or fund expensive home improvements.
Some people may want to switch from a variable rate mortgage rate to a fixed rate so they know exactly how much they will be paying each month in times of financial uncertainty.
You can start by researching what's available on the market, in some cases once you've found a good deal you can approach your current mortgage provider to see if they are willing to match the deal, this way you won't have the hassle of having to switch to another lender. If they are unwilling then you can proceed to apply for a new mortgage deal, but be aware that you will need a solicitor to deal with necessary paperwork and to facilitate transfer of funds.
Over the 25 year (or more) course of your mortgage your circumstances are likely to change so why not adapt to this by changing mortgage providers who better suit your current financial circumstances. For example, in this unprecedented period of low interest rates a tracker mortgage is a very good option but in the next few years the base rate will almost certainly rise and so a fixed rate mortgage may suit you better. There are lots of different types of mortgages available, if you are so not know your fixed to your tracker, or you offset to you interest-only: read our handy guide to mortgages.