Your house is quite possibly your biggest, and most valuable asset. How you utilize that value can help to elevate your financial situation. One way is to refinance or remortgage your home. Remortgaging entails replacing your existing mortgage with a new mortgage.
There are two ways to approach a remortgage. The first is a renewal, where you seek to get an identical amount to what you currently owe. The second is refinancing, where you want to increase the total amount, you owe. This is done by releasing a portion of your home equity.
When you approach a remortgage, the best thing you can do is end the term of your existing mortgage. This means that you can enter a new contract with a different lender. However, before you decide to go down this path, you need to know the benefits or issues that may arise. That way, you can make an informed decision about whether you should remortgage your house.
Reasons for Remortgaging your House
There are advantages to remortgaging your house and positive reasons to consider this option. These include: –
- • The chance to make significant savings on your monthly payments. This is possible through negotiating for better interest rates or improving the terms of your mortgage. This could include switching between fixed and variable mortgage interest rates.
- • Remortgaging may help you accelerate your payments without facing early payment fees. You could also seek an agreement that extends privileges when you make prepayments.
- • Re-amortize your mortgage. This could include increasing your monthly installments, updating the frequency of payment terms, or accelerating the payment of the principal.
- • Take advantage of your home’s equity by cashing in up to 80% of your home’s value. This is a good idea if you seek to make investments that will give a possible return.
- • Some people choose this option to consolidate their debt. Using the funds from the remortgage, all outstanding debt can be paid. This leaves only one loan to clear.
- • Compare remortgages and determine which one can help you re-organize your finances. This can set you back on track and enable greater control of your financial future.
Always make sure to evaluate several options for remortgages before you settle on one that may work for you.
Reasons for Not Remortgaging your House
As you consider all the funds or savings that you could benefit from when you remortgage your home, here is why you may take a step back.
- • An increase in interest rates could lead to you paying more if you remortgage. This will have a significant effect on your future disposable income.
- • If the remortgage will lead to a penalty such as an early repayment charge. This could apply when you opt to move your mortgage from your existing lender.
- • You may not receive the same deal as you did when you got your initial mortgage. However, you may find that you qualify for a smaller amount with a new lender.
Now you are clear on why you should or should not consider when remortgaging your house. Next, you need to consider the following: –
The Size of your Current Mortgage
This looks at the amount that you currently owe on your existing mortgage in comparison to the value of your home. If your need for the remortgage is small compared to the home’s value, you are a lower risk customer. This is because it reveals to the lender that they can recover the debt with ease if necessary. On the other hand, if the balance is high, you may find it challenging to negotiate a good deal, and the savings may not be viable enough to remortgage.
Your Financial Status
The lender will take time to analyse your financial history to ensure that you can afford the new mortgage. This means you need to be ready to provide information on your income and expenses. You may also need to explain whether you have any changes in your circumstances. This could affect your ability to get some funds.
The Terms and Conditions or Fine Print
When you are signing a contract, make sure you read the fine print. This is the most essential part of the contract. You will find information on any limits, such as limitations of early repayment or overpaying. This could affect the speed at which you pay off your remortgage. In addition, there will be information on exit fees. Read these as you may want to switch again in the future. However, you do not need restrictive fees.
Should you decide to remortgage your home, you must shop around for the best deals. Compare remortgage deals to evaluate fees, penalties and all terms. There are now a range of remortgage deals available for people of all ages. These include opting to receive the cash for your home as a lump sum or even through monthly payments.
Like any loan, you need to keep up with the payments. If you already own your home outright, you need to be clear of the risks involved in taking out a mortgage on your property. It means that you are putting your house in the hands of a lender. If you fail to repay, they could repossess your house. Researching to compare remortgages and choose the one that is to your greatest advantage.