Mortgages might seem like a maze of complexity, and when you throw remortgaging into the mix, it can become quite daunting. It's time to debunk some common misconceptions that you might have about remortgaging.
You might think it's only for those in financial difficulty, or perhaps you believe you have to pay off your current mortgage before considering it. Maybe you're under the impression that your current lender is your only option for remortgaging, or that you won't qualify if your credit is less than perfect.
But what if these assumptions are standing between you and potential financial benefits? There's more to uncover about the reality of remortgaging, and it may not be what you expect.
Myth Remortgaging will increase /decrease my monthly payments
Contrary to popular belief, remortgaging doesn't necessarily increase or decrease your monthly payments; it all depends on the terms of your new mortgage deal. If you're considering this route, you're not alone. Many homeowners are drawn to remortgaging as a way to better manage their finances.
However, it's crucial to understand that remortgaging isn't a one-size-fits-all solution. It's a financial decision that requires careful consideration and a clear understanding of your current and future financial circumstances.
Say, for instance, you secure a new mortgage with a lower interest rate; you might see a decrease in your monthly payments. Sounds great, doesn't it? But what if the lower rate comes with a longer term? You could end up paying more in the long run because of the extended lifespan of your loan.
On the flip side, if you opt for a shorter loan term with a higher interest rate, your monthly repayments may increase, but you'll pay off your mortgage quicker.
What's most important is that you carefully consider all possible outcomes. Consult with a mortgage broker, do your research, and make the decision that's right for you. It's your financial future, after all.
I won't qualify for a remortgage if I have bad credit
Busting this myth wide open, it's not impossible to remortgage even if you've got bad credit. Yes, your credit score is a significant factor, but it doesn't necessarily exclude you from the possibility of remortgaging. There are lenders who specialise in dealing with clients with less than perfect credit, and they could provide the solution you're looking for.
Here are some actions that might boost your chances:
Improve your credit score:
Start paying off your debts, make all payments on time, and don't apply for new credit. Over time, your credit score will improve.
A mortgage broker can help guide you through the process, understand your options, and find a suitable lender.
Consider specialist lenders:
Some lenders work specifically with those who've bad credit. They may offer remortgaging options that high-street banks won't.
Regularly checking your report can help you understand your credit situation better and see where improvements can be made.
Save for a larger deposit:
The more equity you have in your home, the better your chances of securing a remortgage, even with bad credit.
I have to pay off my current mortgage before remortgaging
It's a common misconception that you need to fully pay off your current mortgage before you can consider remortgaging. This is simply not true. In fact, most homeowners remortgage while still having a balance on their current mortgage.
Let's clear up this misunderstanding right now.
Remortgaging is essentially switching your existing mortgage to a new deal, often with a different lender. You don't have to wait until you've paid off your current mortgage to do this. Instead, the outstanding balance of your current mortgage is paid off by the new mortgage. This can be a smart financial move if the new mortgage offers better rates or more favourable terms.
Think of it this way. You're not adding a new mortgage on top of your current one, but rather replacing the old one with a better deal. This can potentially save you a lot of money in the long run.
Remortgaging is only for those in financial difficulty
Another widespread myth suggests that remortgaging is only an option for those facing financial difficulties, but that's far from the reality. In fact, you'll find that remortgaging can be a wise financial move for a variety of reasons. It's not solely a last-ditch effort to manage overwhelming debt.
Here are a few scenarios where remortgaging might be a beneficial move for you:
Lower mortgage interest rate:
If rates have dropped since you took out your original mortgage, remortgaging can help you save money in the long run.
Better Mortgage Rates than your current lender:
if your deal is due to come to an end, you are not obliged to remain with your existing lender. Seeking a new rate from a different lender often means securing a deal that is better suited to your current circumstances.
Remortgaging can give you the extra funds needed for major renovations or repairs.
Better Mortgage Terms:
You might find a mortgage with more suitable terms, like a shorter repayment period or more flexibility.
While this does relate to financial difficulties, it's not the only reason to consider remortgaging. It can simplify your finances by combining multiple debts into one payment.
If your property's value has increased, remortgaging can allow you to access this equity.
My current lender is the only option for remortgaging
Just as you aren't restricted to remortgaging only in financial difficulties, you're also not limited to your current lender when considering this option. You're free to look elsewhere and, in fact, it's encouraged. While it's convenient to stick with what's familiar, it's not necessarily the best move.
It's crucial to remember that the mortgage market is competitive. Many lenders are vying for your business, and they may offer better rates or terms than your current lender. Don't let loyalty blind you to a good deal. It's your money, after all, and you've got every right to make it work harder for you.
So, don't fall for these common misconceptions about remortgaging.
Your monthly payments could alter, but not always.
Bad credit isn't necessarily a barrier and you don't need to clear your current mortgage first.
It's not just for those in financial strife, and you're not stuck with your current lender.
Make sure to do your research and consult a financial advisor to see if remortgaging is right for your situation.