Most homes in the UK have a secured loan attached to them, in the form of a mortgage. It is comparatively rare for buyers to pay for homes outright in cash, making decades of mortgage payments the norm for the majority of homeowners.
Consequently, those who are still repaying their mortgages often question their eligibility for remortgage products. If you already have a loan secured against your property, is it possible to successfully obtain another secured loan?
If so, under what circumstances would it be sensible to go ahead and remortgage your home?
What is a Remortgage?
Remortgage loans can be issued in a wide variety of forms with different purposes in mind. Though in the vast majority of instances, remortgaging involves taking out an entirely new mortgage with a different lender.
The new mortgage is used to repay the existing balance on the homeowner’s current mortgage, and they subsequently transfer their monthly repayments to the new issuer.
This can be an attractive option when the terms, conditions and costs of a current mortgage become unfavourable. Oftentimes, significant long-term savings can be made by switching to a new provider at the right time.
For example, if your introductory fixed-rate period is coming to an end and your lender’s variable-rate products are far from competitive, it simply makes sense to switch.
Who is Eligible For a Remortgage?
Applying for a remortgage works in a similar way to applying for a conventional home loan; the process typically takes between four and eight weeks to complete, during which all (or most) of the usual financial stress tests will be performed.
This will include a full credit check, a look at your current financial position, verification of your employment status and so on.
However, the fact that you already have a mortgage secured against your home will be largely inconsequential. This is due to the fact that remortgage loans are, by their nature, aimed mainly at people who are still repaying their original mortgage.
You can remortgage a home after repaying 100% of your mortgage to free up equity, but the most common application for a remortgage is to access a more competitive deal.
Can I Raise Extra Money by Remortgaging?
Along with switching to a more competitive deal, homeowners who remortgage often take their opportunity to raise extra money in the process. This is made possible by opting for a remortgage of a higher value than the outstanding mortgage balance, raising money in exchange for a slightly longer repayment term.
Or perhaps, higher monthly payments, as agreed with the lender.
An affordable remortgage can therefore be just the thing to both save money and raise funds for important projects. Home improvements and alterations, upgrading the family car, or perhaps simply taking the long-overdue holiday you have delayed indefinitely.
If you are in a generally stable financial position, you are most likely a good candidate for a mortgage. Though before applying, consult with an independent broker to ensure you get the best possible deal.