Reasons to remortgage your house: the money-saving benefits of switching mortgages.
Remortgaging your home is a strategic move that can unlock substantial financial benefits, yet many homeowners in Ireland overlook this opportunity. From lowering your payments to accessing cash for home improvements, there are many valid reasons why remortgaging could be the right financial move to make the most of your home’s value and help you achieve your financial goals. In this article, we’ll cover what remortgaging is, why you should consider it, and how switching mortgages can save you money and enhance your overall financial stability.
What is a remortgage?
A remortgage is when you replace your existing home mortgage with a new mortgage from a different bank or mortgage lender. You might want to consider a remortgage when you come to the end of a fixed mortgage rate deal or of if you are looking to raise extra cash for home improvements. So, you take out a new mortgage on better terms which replaces your existing mortgage.
Valid reasons to remortgage
There are many valid reasons why a remortgage can make a lot of sense for you. You might be able to save money with a better mortgage interest rate, you might need cash for home improvements, or you might want to release equity to consolidate expensive short-term loans. Whatever your reason, it is good to explore if remortgaging your home makes sense for you!
As specialised mortgage brokers in Ireland, we help people like you every day to save money with lower mortgage rates and pay your mortgage off early. The following are the main benefits of switching mortgages for you.
Remortgage to a better interest rate
Sometimes it is necessary to switch mortgage lenders and avail of better mortgage interest rates. A mortgage is a big monthly expense for most of us and so it can make an enormous difference to our finances if we can reduce our biggest monthly expense.
Let’s look at the following example to see how much you can save money on your monthly mortgage repayments with a better interest rate.
That’s a saving of €1,656 per year or a whopping €41,400 over the remaining term of the mortgage. So now you can see how a better mortgage interest rate can mean substantial savings for you.
Change in financial circumstances
A mortgage is a long-term commitment and during the mortgage term your life can change. Sometimes life can throw you curve balls at you, and you need to make changes to your mortgage to suit your new circumstances.
Separation or divorce for example can mean that you also need to separate your finances from your ex-partner. One option would be to sell the house, clear the existing mortgage, and share the equity proceeds.
Another option would be to use a remortgage so one of you could buy out the other. In this situation the person buying out the other will need a new remortgage which will clear the existing mortgage and provide the funds to buy out the other persons equity share. This is only an option if one of you meets the mortgage lender criteria to get a mortgage that is large enough to buy the other person out.
Access equity in your home
Accessing the equity you have in your home is another valid reason for remortgaging. Over time property prices normally increase and the mortgage balance will reduce. Your equity in the property is the property value minus the mortgage balance. The equity value in the property should increase over time. A remortgage will allow you to access the built-up equity in your home. You can release the equity in the form of a cash lump sum to fund life expenses like children’s education costs, home improvements or other big one-off expenses.
A remortgage can help you fund big ticket items like home improvements in a more affordable way than other forms of short-term unsecured debt. You can get a lower interest rate on a mortgage, and you can also spread the repayments over a longer term. You should however look at the pros and cons of taking debt over a longer term.
Better and more flexible mortgage terms
You might want to remortgage so you can switch mortgage lenders to avail of better and more flexible mortgage options. Below is an example of the flexible options that are available in Ireland with some (but not all) mortgage lenders.
Make overpayments without fixed rate penalty
Make overpayments without fixed rate penalty up to certain limits. This means you can benefit from the security of a fixed mortgage but at the same time have the flexibility to make overpayments without incurring any fixed rate penalties. Making overpayments can significantly reduce the mortgage interest you pay. So, this is a great flexible mortgage feature to have.
Split your mortgage rate. Part fixed rate and part variable rate.
Sometimes it can be hard to decide if you want to take a fixed rate or a variable rate. Fixed gives you security whereas variable gives you flexibility to pay off the full mortgage whenever you like without any penalties. The option to be able to split your mortgage rate, part fixed, and part variable is a great option if you need that added flexibility.
Payment breaks for up to 3 months.
Mortgage payment breaks can be great if you need to take time off work or have unexpected one of expenses. if you need to take time off work or cover unexpected one-off expenses.
Pay your mortgage in 11 repayments per year so you can have a month off.
This is an option that some mortgage lenders in Ireland will allow and can be a wonderful way to take a month off mortgage payments for Christmas or whenever you plan to go on holiday each year. With this option you can make higher mortgage repayments for 11 months and then not have any mortgage payment to make in December for example. You are still paying the full annual mortgage payments each year but with a month off.
Get Cashback on your mortgage deal
Getting cashback on a new mortgage deal, can be a perfectly valid reason to remortgage your house. Cashback deals can more than cover the cost of switching mortgage lenders. When you get a new remortgage there will be legal costs involved as you will need to employ a solicitor. The good news is that banks and mortgage lenders are hungry for your remortgage business and so want to make it worth your while switching mortgage providers.
Mortgage lenders offer cashback deals of up to 3% of your mortgage amount. This means you can get free cashback of up to €7,500 on a mortgage of €250,000. The legal costs to switch to a new remortgage should be no more than €1,500. So, with mortgage cashback offers you will have enough to cover your solicitor costs and some change to pay for a family holiday or you could put the cash into savings for a rainy day.
Reduce the mortgage term
One of the most sought-after benefits of switching mortgages is to be able to reduce the mortgage term. If you can get a better remortgage interest rate, then you will have the option to reduce your mortgage term and clear your mortgage sooner. Let us consider the following example where you could reduce your mortgage term by 4 years with a new remortgage interest rate that is 1% lower.
So, in this example you would keep your mortgage repayment almost the same (only €12 more) and you would clear your mortgage 4 years early. You would also save a whopping €63,696 in mortgage interest.
Loan consolidation
Buying and maintaining a home is expensive and, in some cases, you may end up taking out expensive short-term loans with your bank or credit union.
The loan repayments on top of your monthly mortgage payments can quickly get overwhelming.
One way to improve your cashflow is to use a new remortgage to consolidate your expensive debts into one lower monthly repayment. The new monthly repayment will be lower as you will get a better interest rate on your mortgage and the repayment term might be longer.
Let us look at the following example of how consolidating expensive short-term debts into a remortgage can improve your monthly cashflow.
So, using this example by consolidating all debt into the new remortgage you could lower total monthly debt repayments by €939.
If you consolidate debt the new loan may take longer to pay off than previous loans. This means you may pay more than if you paid over a shorter term. Ideally, mortgage terms should be as short as possible and consistent with your ability to repay.
Home improvements
Using a remortgage to raise extra funds for home improvements is one of the most common reasons to remortgage your house. Mortgage lenders are comfortable approving you for a new mortgage based on a multiple of your annual income and if you keep the LTV (Loan to Value) within 90%. So as long as your income aalows a higher mortgage amount and there is equity in your home then you can remortgage to fund home improvements.
Why should I remortgage with MortgageLine?
MortgageLine is a market leading Mortgage Broker with a team of experienced Financial Advisers who are ready to help you. We have a 5-Star Rating on Google and Trustpilot and are proud to be a top rated Mortgage Broker helping clients all over Dublin and Ireland.
Whatever your reason for remortgaging, MortgageLine understands the importance of making sure you get access to the best possible mortgage interest rates. Our mortgage experts have the knowledge and experience to help you navigate the mortgage market to secure the most competitive mortgage rates and terms.
Request a free no obligation mortgage review with an expert MortgageLine Broker today.
Start the Process. Make the Switch!
If you’re ready to talk about the possibility of a remortgage and experience the benefits for yourself, get in touch with MortgageLine!
Apply online at www.mortgageline.ie or Call Us on 01 707 9880
