How a Remortgage Differs From A Mortgage

More and more people in the UK are seriously considering taking out a remortgage loan to free up more cash, or to save money on the interest rates they are paying on their mortgage. They now realize that taking out a remortgage can actually enable them to save thousands of pounds in interest payments over their loan term, compared to taking out a new mortgage.

So why choose the remortgage option instead of getting a new mortgage? Choosing the remortgage option simply means that you are replacing your existing loan with a new loan granted by a different lender. This option also eliminates the need for new valuation and searches, thereby effectively reducing the cost of getting a new mortgage. The main differences of getting a remortgage from a mortgage are the loan terms, benefits and risks involved.

A mortgage is principally a loan where you take out cash using your real estate property as security. Real estate property here mainly comprises your house, flat or apartment. You can also take out a commercial mortgage by using your office, shop or factory or even a buy-to-let mortgage whereby you intend to rent out a property to other tenants. However, should you fall behind your payments schedule, there’s the risk of losing the entitlement to your mortgaged property.

Whereas if you remortgage, you have more chances of gaining more benefits with few risks involved. But, before you decide on this option, you first need to establish whether the benefits will outweigh the potential risks. If you are considering a remortgage due to any of the reasons listed below, then this type of loan is a good option for you.

1. Cutting back on repayments and saving money on the interest;
2. Switching to a different type of mortgage product (ie. from a variable rate mortgage to a fixed rate mortgage, thereby finally ending your concerns on the need to make budget adjustments every time there are interest rate changes);
3. Changing your current mortgage deal to a better remortgage rate;
4. Increasing the size of your home loan;
5. Freeing up cash cost-effectively by releasing equity in your property; and
6. Substantially reducing your monthly mortgage payments.

Of the above remortgage reasons, the most popular is the potential to reduce your monthly repayments for your original mortgage. Before going for it, ensure that you have thoroughly reviewed the rate you are currently paying versus interest rates on the market. If you find that you will get better rates on a remortgage, then go for this type of loan, unless your current mortgage is subject to early redemption charges or overhanging redemption charges.

Given all the different loan terms, benefits and risks, you might end up getting a less beneficial remortgage plan. It is always best to get a free no obligations quote. You may get a free remortgage quote from Money Beacon, who currently partners with leading brokers, offering you over 9,000 plans. Through Money Beacon, you’re sure to find the right remortgage plan.