In the past people taking out mortgages generally did so in order to buy their first property or move to another if they were already on the housing ladder. In recent years there has been a huge growth in the number of homeowners remortgaging for other reasons.

These vary from wishing to reduce monthly repayments, or reducing the overall amount of money the mortgage loan costs and increasingly raising money to clear more expensive debts such as credit card balances, bank loans, store cards etc.

Some homeowners choose to re-mortgage their home for more years than what is left on the current mortgage. For example, if the homeowner has only 15 years left to pay on the current mortgage before it is paid off completely then they may choose to extend to say 20 or 25 years. Since the amount owed on the mortgage is now spread over the longer period the amount of the monthly payment will probably be reduced.

However when you remortgage over a longer period you may well end up paying more in total because of the greater interest that accumulates. Conversely homeowners who are interested in saving money in the long run may choose to re-mortgage the home for a shorter period of time which may increase monthly payments. Or, the homeowner may choose to re-mortgage the home for the same period of time but can still possibly save money if the interest rate on the new mortgage is less than the interest rate on the original mortgage. Or, the homeowner may choose to re-mortgage the home for the same period of time but with a lender offering a lower interest rate and can still save money if the savings on the interest rate out weigh the costs of changing lenders.

When trying to decide whether remortgaging is a good financial decision, homeowners will need to consider the interest rate they are paying on their current mortgage compared to the interest rate the lender is offering on the new mortgage. They should also check whether there are charges or penalties by their existing lender for switching mortgages. If you can find a lender willing to waive some fees and offer a lower interest rate than the current mortgage and total payments will be reduced over the term then a remortgage could make sense.

For homeowners who are remortgaging in order to clear other debts, factors such as how much it is costing to raise the extra funds will also need to be considered.

The new contract will specify the monthly repayments and interest rates so a comparison can be made