Re-mortgages - why re-mortgage?

There are mainly two reasons behind a decision to re-mortgage. You may be looking to save money by paying a lower interest rate on your debt or you may want to take advantage of the fact that your property is worth substantially more than your outstanding debt i.e. cash in some of the equity in your home. Thus by re-mortgaging you could:

• obtain a better mortgage rate, saving on your monthly outgoings
• release equity in your property to pay for home improvements more cheaply than by using a personal loan
• consolidate existing shorter-term debts that carry higher interest rates, thus reducing your monthly outgoings

The UK re-mortgage market is highly competitive with thousands of re-mortgages on offer. It is highly likely that you would be able to find a mortgage that will allow you to reduce your monthly outgoings. The question is whether the saving you make might be offset by the costs of moving your debt.

If you are planning a new kitchen or a new bathroom, for example, it makes sense to consider re-mortgaging to fund the work. After all, you are investing in the value of your home so it makes sense to set the cost of improvement, the liability, against the asset, a more valuable home. Of course, you may just want the money for a big holiday or a new car.

If you have shorter-term debts, such as credit card debt, personal loans, overdrafts, you may find that the interest rate being charged is substantially higher than the rate charged by your mortgage lender. You could reduce your monthly outgoings by rescheduling all your short-term debt onto your mortgage. However, while you may end up paying much less on a monthly basis you should be aware that over the term of your mortgage this could cost you more as you will be paying the interest for a much longer period.