What Is Remortgaging?

Remortgaging is when you take out a new mortgage on your existing property. You can pay off your old mortgage with the proceeds from your new mortgage whilst using the same property as security.

You have the option to strike a deal with your current provider or start again with a new mortgage provider. You will have to stay in your existing home to use the equity you have in the property as security for the mortgage.

Why Do People Choose to Remortgage?

People may choose to remortgage for several reasons. You can save thousands of pounds by remortgaging. Releasing equity to your property overall is likely to improve your financial situation.

When you come to the end of your fixed-rate mortgage deal (usually between two to five years) you will then be moved onto your mortgage lender’s standard variable rate mortgage. This usually means paying a much higher interest rate. Remortgaging could get you a better deal with lower rates and lower monthly repayments too. 

Homeowners may choose to remortgage for a variety of reasons, including some of the following:

• To reduce the monthly mortgage payments amount
• To get a cheaper rate
• To pay off a mortgage earlier
• To raise capital
• To consolidate other short-term debts
  

What Is Equity?

Equity in your home refers to the portion of your home that you own outright. Once you have finished paying off your mortgage, your equity will be the whole.

Your equity also includes the amount you put down for a deposit on your property. The larger your deposit, the more equity you have from the very start. Your equity will also increase if the value of your property goes up.

What is LTV?

New ParLTV stands for loan-to-value ratio. The loan-to-value ratio is the difference between the size of your mortgage and the amount of equity in your home. This is consistently demonstrated as a percentage.

As you pay off your mortgage or your home increases in value, the LTV will go down and your equity will increase. When you remortgage, your mortgage lender will use your LTV to work out an interest rate that they will charge you. The lower your LTV, the better the rate you will be offered.

Remortgaging to Release Equity

When you hear the term remortgaging to release equity, you are securing a loan to free up cash - instead of cash being tied up in your home. Unfortunately, this means you are taking on more debt so it is essential to weigh up your options and the pros and cons of your situation before you jump straight into remortgaging.

In most cases, you will need a decent amount of equity tied up in your home before you can release it. It is important to remember that when you remortgage to release equity you are essentially borrowing money based on the value of your home. You will therefore be taking on a larger mortgage, usually with higher repayment costs.

Benefits of Remortgaging to Release Equity

Equity release is a good way of releasing cash from your home without having to move or pay anything back until you die or move into long-term care. Some of the key benefits of remortgaging to release equity include:

• It lets you gift inheritance to loved ones and be around to see them enjoy it
  
  
• It can be used to pay for significant things like children's university fees or a gifted deposit for your children
  
  
• It frees up money that would otherwise be tied up in your property

• The money freed is often used to make home improvements, repairs or renovations
  
  
• If you have a large amount of equity built up in your home, remortgaging it may not significantly change your LTV
  
  
• Lower LTV could mean a better interest rate on your new dealNew Paragraph

Downsides to Remortgaging to Release Equity

If you are considering remortgaging to release equity then it is important to weigh up the downsides as well as the upsides before you make your final decision. Some of the main points to consider involve:

• Taking on a larger mortgage means that your monthly repayments are likely to increase
  
  
• You will end up paying back more over a longer period of time
  
  
• It could work out more expensive than a standard personal loan
  
  
• If you can’t afford the repayments, your home could potentially be repossessed
  
  
• House prices can fall, if this happens you could find yourself in negative equity. This is when the outstanding mortgage is higher than your home’s value
  
  
• Rushing in without financial advice could jeopardise your credit score
  
  
• You can face fines if you are in the introductory period of your current mortgage. Early Repayment Charge can be as much as 5%
  
  
• Other, better ways may be available to raise cash than releasing equity

LTC Mortgages

At LTC Mortgages, we always aim to provide you with a solution that suits you and your needs - no two cases will be the same and we understand that. Whatever your reasons are for wanting to remortgage, we can help you find the right remortgage deal. 

Making the remortgage process as simple as possible and stress-free is what we do best. Having expert brokers at your service with over 15 years of experience within this industry means that we know just how to get you the best deal. 

Contact us today for more information or for any questions that you may have, our details can be found on our website.