When you need some extra money to pay off outstanding debts, make home improvements or for any other purpose it can sometimes be a challenge to find the extra funds. This is why many people are opting to remortgage their homes to take advantage of the equity that may be unused due to recent increases in house prices. One type of remortgage that is very popular is the variable rate remortgage.
This is a remortgage that works in the same way that a variable rate mortgage works, by linking to the lenders standard variable rate which is usually 1.5% / 3% higher than the Bank of Englands base rate. As a result your remortgage repayments can go up and down in line with any increases or decreases in the interest rate.
Variable rate mortgages and the credit crunch
With interest rates at an historical all time low many people are finding that their existing lenders variable rate is lower than the mortgage rate they could be offered by a new lender if they remortgaged. In many cases unless you require some additional borrowing on your mortgage staying with your existing lenders variable rate will probably be more beneficial. It is important to remember than interest rates will go up at some point so taking a fixed rate remortgage once you think interest rates have bottomed could make sense. Below are some advantages and disadvantages of a variable rate mortgage to help you make an informed choice.
Advantages and disadvantages of a variable rate remortgage
As with any kind of remortgage there are advantages and disadvantages of taking out a variable rate remortgage-
Advantages
A variable rate remortgage will allow you to take advantage of a fall in interest rates by allowing you to pay less for your mortgage repayments.
You can change your remortgage lender without incurring a penalty charge.
Disadvantages
You have difficulty in budgeting as you are not sure that your remortgage repayments will remain the same for any length of time.
If the interest rate goes up so will your remortgage repayments and you cannot do anything about this.
Your lender might not pass on the same reduction in the Bank of Englands base rate so you might not benefit as much as you thought.
Variable rate mortgage advice
If you would like more information on a variable rate remortgages you can take a look at one of the many online mortgage comparison websites or speak to an independent mortgage advisor l is will offer fee free mortgage advice with no obligation.
Jason Haines is a protection and mortgage advisor at godirect.co.uk, here you can get instant cheap life insurance and mortgages online information.