Common Sense Shows A Remortgage Makes Financial Sense, Here's Why...
There are lots of reasons that people remortgage
. Some want to secure a better deal on their home loan whilst others want to free up some cash for other purposes - sometimes known as a remortgage and further advance. Our guide examines the various reasons why you might wish to remortgage.Getting a Lower Interest Rate: After a certain time in your mortgage, you may find that you are put onto a standard variable rate, or that the interest rate you are paying is higher than you can obtain elsewhere. This is one good reason to remortgage, as you can get a much better deal by switching to a new product.
Home renovation can be a series of small improvements, like re decorating a room, or a major alteration such as refitting the kitchen or bathroom. You might even undertake something more radical like building a pool on the property. Big projects need to be carefully thought through however. Every property will have a ceiling price based on the neighbourhood it is in. There is no point spending GBP 20,000 on a pool and expecting to add GBP 35,000 to the property's value, if you have an intercity railway line at the bottom of the garden.
Improving Your Home: Home improvements can be costly, so many people opt to remortgage and take extra cash in order to fund their projects. As the interest rate is low in comparison to unsecured loans, this is a fantastic way to fund a home improvement project and to add value to your home.
Finding a Better Deal: When you mortgage deal comes to an end it is an ideal time to shop around for another mortgage product. A remortgage allows you to benefit from a low rate fixed or tracker deal from another lender, saving you money on your monthly repayments.
Another popular home improvement is adding an extension to the home, either as a conservatory or as additional brick rooms. This can allow for a larger kitchen or adding new bedrooms on which can dramatically increase the value of your home.
Debt Consolidation: If you have balances on credit cards or personal loans it can be beneficial to remortgage in order to repay these debts. It can reduce the interest rate that you pay as well as reducing your monthly outgoings. Remember that you may end up paying more interest in total as the loan will be taken out over a longer period.
The flipside to this, is the fact that in the short term your monthly bills will be reduced. If you have a store or credit cards with an APR of 20% for example, the rate can be cut to 5% or 6% by consolidating it onto the mortgage. This will take a huge burden from your shoulders financially, especially if you have numerous debts like this.
When remortgaging it can be worthwhile calculating exactly what you would save in the short term and how much you would pay in the long term. If you are unable to do this, a mortgage broker or financial advisor may be able to help you.
Purchases: A final reason why you may want to remortgage your home is to raise cash for a one-off purchase such as a car. Mortgages can often be a cheaper way of borrowing than a personal loan or car finance. Again, bear in mind that you will pay interest on the debt for the whole term of the mortgage whilst your asset may depreciate in value quite quickly.
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