Advantages of Remortgaging

You can probably cut your mortgage costs by unto a third, if you are paying one of the large banks or building societies, standard variable rates. E.g. a £100,000 mortgage at a standard rate of 6.5% you will pay £542 a month. If you switch on to a home loan of 4.24%, then you can save £189 a month, reducing bill to £353.

These type of deals were possible in UK in 2006. A deal of 4.24% could be found from a variable rate with a discount of 0.5 % on the base rate. These deals will constantly be changing. Often special mortgage deals are only available for a short period of time. If base interest rates change, then these deals will also change. However, it is a rather difficult task to find the best mortgage quote from scanning a variety of mortgage deals.

Remortgaging will invariably involve an arrangement fee (a typical fee) £499. 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. Other benefit is the monthly savings which have an additional tax advantage .

Remortgaging will also enable you to cut costs considerably and also is an ideal way to partake of equity withdrawal, that is, when you take money from the increased value of your house. E.g. 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.

If you are not willing to sell the house, what you can do is remortgage. Therefore you could ask a mortgage holder for 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.

This does mean that you will have higher monthly repayments.