The mortgage journey is rewarding. It has its fair share of both highs and lows, but in the end, you will end up with one of the following: either your dream property to settle down in and make that next step, to go further up the ladder or an investment purchase to provide some extra income.
Whichever path you took, there will ultimately come a time when your mortgage term is coming to an end. You could sell up and upsize/downsize into a new property. Perhaps you are looking to sell your portfolio to the tenant or another buyer and look at other avenues. The most popular choice though is to go down the remortgage route.
A remortgage is where you use the proceeds from a new mortgage to pay off a pre-existing mortgage. There are several different options available when taking out a remortgage, ranging from minor to major.
Having worked in the industry for over 20 years our resident “Moneyman” Malcolm Davidson (host of our YouTube channel MoneymanTV), thought it would be best to compile a quick guide to all the options you could have when remortgaging.
Your initial mortgage deal will normally last 2-5 years and feature low fixed rates or perhaps discounted rates. In some instances, you may even be placed on a tracker mortgage, which follows the Bank of England’s base rate.
When your term ends you will likely be moved along to the lender’s Standard Variable. In sum, an SVR is a mortgage with an interest rate that can potentially change based on what the lender wishes to charge. This does not follow the Bank of England’s base rate like a tracker mortgage.
As such, these are usually the most costly paths to take, leaving many to look at remortgaging for better rates, which we hope will save you money on your monthly repayments.
After occupying your home and living there for a few years or circumstances have changed, you might decide that you need the extra room or larger living space, a new kitchen, or a home office. Instead of moving into a larger house, many try to release their equity with a remortgage to cover the costs of these.
Though it may seem like a daunting concept having to obtain planning permission and fund/manage your own project, some say it’s a lot less stressful and more rewarding than the process of finding a new home, selling your current one, and moving your belongings.
Long term, creating more space and maintaining the property can increase the value of your property, handy if you ever decide to sell up or rent out.
In certain cases, some choose to remortgage in Hull for a more suitable mortgage term, by decreasing the length or switching to a more flexible product. A reduction in the length does mean you will not be paying back your mortgage for as long.
Therefore, you are not completely tied down forever, but as such your monthly repayments will be a lot higher. The longer your term, the lower the payments will be over time.
A few opt for a more flexible mortgage term when they remortgage, benefits under this option can prove endearing to some homeowners. You may get the chance to overpay, resulting in being able to pay your mortgage off as quickly as you would like.
In addition to being able to carry the same mortgage and rates over to another property, should you decide to move at any point in future.
Although a flexible mortgage sounds close to perfect, they usually come in the form of a tracker mortgage, which as previously stated follows the Bank of England base rate. That means one month your payments could fluctuate based on interest.
Everyone has a level of equity in their property. The equity is worked out with the difference between what is still owed on the mortgage and the current value of the property. As touched upon at a glance, this can be used for home improvement. However, there may be other options available for you out there.
Some are using it to cover long-term care costs, supplement their income, go on holiday, pay off an interest-only mortgage or go on a shopping spree.
For Buy to Let Hull landlords, they will use a remortgage to release equity as a means of covering their deposit for buying a future property to add to their portfolio.
If you are a homeowner aged 55+ and have a property valued at a minimum of £70,000, it may be worth your time to look at your options for Equity Release in Hull. Get in touch with an experienced later life mortgage advisor in Hull to learn more about later life lending.
On the topic of releasing equity, another big one people use it for, is to pay off any unsecured debts you may have accrued over time.
Though it may seem easy enough, debt consolidation not only bases the amount on how much you’re owed and the value of the property but also on your credit rating. This could mean you are limited in the amount you can borrow.
Additionally, to pay off your previous mortgage and your debts, you will need to borrow more than your outstanding mortgage amount. This means your monthly repayments will most likely be higher. Though not an ideal situation, at least you can rest assured that should you find yourself dealt an unfortunate hand, you do have some options out there.
Should you find yourself with a particularly damaged credit rating, you do still have options to choose from, though these will not be easy and require very specialist remortgage advice in Hull before going forward. Even then, there is no guarantee.
You should think carefully before securing other debts against your home. By adding your unsecured debts to your mortgage, which is secured on your home, you are potentially putting your home at risk if you cannot make the required repayments.
Although the total monthly cost of servicing your debt may have reduced, the total cost of repayment may still have risen as the term of your mortgage is longer than it may have taken to repay the debts originally.
If you are reaching the end of your term and are wondering what your option may be for remortgaging, it is worth your time to get in touch with an experienced and trusted mortgage broker in Hull.
Our remortgage advisors in Hull will be able to discuss your options, to create the best plan of action for you in the next step of your remortgage journey. We aim to ensure this go around is a quicker and smoother process than your first time.