If you’ve been considering a remortgage loan, now could be the best time to obtain one. As home values continue to rise, lenders are offering attractive rates to homeowners who have built up their equity position.

The Mortgage Lending and Administration Return (MLAR) published by the Financial Conduct Authority (FSA) revealed that remortgages accounted for 34% of the total lending activity in 2009. The statistics for 2010 look even more promising.

What is Remortgaging?

Remortgaging is simply exchanging an existing home mortgage loan for a new one. It could be completed with the same lender, or you could opt to go with a new lender’s program if it meets your needs better. Just as with a new home purchase, the remortgage process gives you the ability to choose a variety of loan options, including a fixed rate, tracker rate, a buy-to-let mortgage and more.

The Benefits of Remortgaging

Homeowners choose to remortgage for a variety of reasons. Many do it take advantage of better interest rates and more favourable offers that are currently limited to new customers. Here are a few other benefits that a homeowner can reap from remortgaging their home:

• A chance to release the equity – Many homeowners who want to have cash for investments or debt consolidation will choose a remortgage. The increase in the value of their financial portfolio could make it well worth the cost of taking out the new loan.
• A way to finance other personal or business expenses – Using remortgage funds could be an inexpensive way to borrow for college, a wedding or a home improvement project. Before going this route, remember to compare the rate and terms for student loans, personal loans and home improvement financing. In addition to personal finances, a remortgage can help to launch the business of your dreams.
• You can remortgage even with bruised credit – Even with an adverse credit record, you can obtain a remortgage. For some people, it will be easier to recover financially if they obtain a remortgage and pay off the mounting debt that would otherwise increase as a result of late payments and penalties.

The Potential Drawbacks of Remortgaging

Just as there are benefits with remortgaging, there are a few potential drawbacks to consider during your decision making process:

• The old lender may charge fees to let you out of your current mortgage. An early repayment charge (also known as an early redemption penalty) could be assessed when you pay off your existing loan. Check your loan paperwork to see if you might be charged.
• The new lender has fees too. You could very well encounter fees from both your old and new lender when you complete your remortgage process.
• If you take additional cash, it could potentially result in a payment that exceeds the one on your old loan. If you are not accustomed to managing a larger amount of debt, you could run into some challenges down the road.

Whether you’re looking for savings or cash, exploring your remortgage options may be a step in the right direction.