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Mortgage refinancing
What is Mortgage Refinancing?

Mortgage refinancing or mortgage refinance is a type of mortgage you may choose to raise extra finance. Refinancing a mortgage also refers to the process of switching or moving to a different mortgage deal or a different loan provider in order to take advantage of better interest rates.

Who needs mortgage refinancing?

Refinancing a mortgage is suitable for any home or property owner who is either looking for additional funds or searching for a more favorable mortgage package.

What types of mortgage refinancing are on offer?  

  • You can obtain a refinance mortgage for all standard mortgage types.

  • It is possible to choose an interest-only mortgage or repayment mortgages.

  • You can choose from the usual rates on offer including fixed or variable rates, discounted offers, and capped rates.

  • The mortgage refinancing term usually lasts for a period of between 1 to 5 years.

  • On the expiration of your specific mortgage refinance deal, you will revert to standard variable rates.

How does mortgage refinancing work?

Generally, if you are planning to refinance a mortgage to free up equity or to raise more funds, your loan provider will assess whether you qualify for mortgage refinancing by using the following criteria:

  • The value of the existing equity in your property

  • The level of your annual income

In most cases, you are normally granted a mortgage between 3 to 5 times a single salary and 2.5 to 3 times combined salaries. There are, however, lenders who are willing to offer more. It is even possible to borrow more than your property value if you approach certain lenders. If you are looking to simply switch lender or product, lenders will normally only be interested in your income.

A deposit is not required if you are refinancing your mortgage for 100%. In all other cases, standard industry terms will apply and you will require a deposit from 5% upwards, depending on your lender. In the majority of mortgage refinancing deals, a deposit is not usually necessary as there is some existing equity already held in your property.

What are the benefits of mortgage refinancing?

If you are refinancing a mortgage in order to raise additional funds, the major advantage is that you will gain access to mortgage interest rates. As these are probably the lowest rates in the whole loans sector, choosing mortgage refinancing is probably the cheaper option than, for instance, taking out a personal loan.

If you are refinancing a mortgage to release equity, a mortgage refinance is a good way of allowing you access to your own money without having to sell your home or property. If you are refinancing a mortgage in order to secure a better mortgage deal, you will enjoy the significant savings created from the new and more favorable interest rates.

Important considerations before deciding to refinance a mortgage

When taking out a mortgage refinancing loan against your property, interest rates of a mortgage refinance may be low. However, it is worth remembering that you are still paying interest if you borrow money in this way. Moreover, as you may be repaying your mortgage refinance loan for a long period, it is possible that you could end up paying back a considerable amount just in interest.

Lastly, check that you are not tied in to your current mortgage package. Check that you will not have to incur unexpected penalty charges or fees if you decide to switch to a mortgage refinance deal.

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