As a whole, the mortgage process can be very surprising and have its fair share of both ups and downs. Some applicants may receive a fast and simple process whereas others may find it more difficult to find the road to mortgage completion.
Either way, once you secure your first property, you will come to a point where you can choose one of two routes to take. Your first option will be to continue climbing the property ladder and move into a new home; your other option, if you feel like you’ve already found your dream home, is to remortgage for home improvements such as an extension or conversion. In this article, we are going to focus on remortgaging and the different reasons why people choose to remortgage.
A remortgage is simply taking out a new mortgage to pay off a pre-existing mortgage. There are lots of different things that you can do at the point of remortgage, it’s completely up to you what you choose.
Generally speaking, you will remortgage every time you come to the end of your fixed mortgage term. If you choose not to remortgage, it’s likely that you’ll fall straight onto your lender’s standard variable rate of interest, which will probably be more costly than your current rate.
Your initial mortgage deal will likely last you around 2-5 years. As mentioned above, if you don’t remortgage you will end up on your lender’s SVR. Sometimes, their rate can be higher than tracker mortgages (track the Bank of England’s base rate), so this could end up costing you a lot more than your usual mortgage payments.
If your mortgage term ends, you can also fall onto a tracker mortgage. A tracker mortgage interest rate will fluctuate depending on how the economy is performing. For example, during the coronavirus pandemic, in March 2020 the Bank of England’s interest rate was significantly lower than usual as the economy wasn’t performing the best. Slowly, as the economy started to recover, the interest rate rose as the months passed.
This is why people often remortgage to find a better rate. Homeowners want to find a better interest rate so that they don’t have to pay as much for their mortgage payments every month yet they are still paying off their mortgage.
Rather than Moving Home in Cambridge, you could always freshen up your existing home to create more space through an extension or conversion. You can also remortgage to fund home improvements such as a new kitchen or living room, it’s completely up to you.
This works like so; when you take out a new mortgage product, the costs for home improvements will be incorporated into your mortgage. This means that your monthly payments will increase and so can your mortgage term.
If you already love the house that you live in, it could save you a lot of money if you were to remortgage over move home. It may be much easier and more beneficial for you in the long run to remortgage for home improvements rather than move home.
As a Mortgage Broker in Cambridge, we’ve seen many applicants that have realised further down the line that they want a different product, however, they are mid-way through their term. They may just want a more flexible product that allows them to reduce their term. Although this could mean that their payments increase, their mortgage term will decrease.
A flexible mortgage could allow you overpay your mortgage payments to pay it off quicker. Usually, people choose to remortgage for this reason if they’ve perhaps had a pay increase or been given a large lump sum of money (e.g. through a redundancy).
Some people may even want to keep their monthly payments the same and remain on their current base rate. When this is the case, you are sometimes able to remortgage to extend your term.
As a homeowner, you are bound to have some equity built up inside of your home. This equity can be turned into cash, and that’s why people sometimes remortgage to release equity.
The amount of equity that’s within your home can be calculated by taking away how much is left on the mortgage from the property’s value. The amount that is remaining can be taken out and turned into cash. You can choose what you spend this money on. It could be for home improvements, a deposit for another property (buy to let landlords) or even a holiday/ to pay off a car loan – you choose!
You can also release equity in the form of a lifetime mortgage. This is often targeted at older homeowners who want extra funding for their living circumstances.
Firstly, debt consolidation is a specialist subject, so we would recommend that you speak with a Mortgage Advisor in Cambridge before rushing into anything.
Consolidating debts consists of incorporating unsecured debt into your mortgage. Doing so will increase your mortgage payments and sometimes your mortgage term too.
All lenders have a different viewpoint on consolidating debts into a mortgage, some may allow it and some may not. Lenders often disallow it as you are putting unsecured debt into a secured asset. This means that if for any reason you fall into arrears after failing to meet your mortgage payments and your property is repossessed, they will lose out on money as there is all of your debt now secured within the property.
It’s a very complex subject that you should get specialist help for. For debt consolidation and Remortgage Advice in Cambridge, you should get in touch with our excellent mortgage team at Cambridgemoneyman.
Having now read about the reasons that people remortgage and how they work, do you think that you could benefit from remortgaging? Whether it’s to access a better rate, for home improvements, for term flexibility, to release equity, to consolidate your debts into your mortgage or for something completely different, there is usually always a situation where a homeowner will remortgage.
If you want to speak with a Remortgage Advisor in Cambridge about remortgaging, feel free to get in touch with our team. We will be more than happy to try and help you accomplish your remortgage wishes.