The mortgage journey is a fruitful journey. It has its fair share of both highs and lows, but ultimately you will end up with one of the following: either your dream property to settle down in and maybe have a family, a stepping stone property to propel you further up the ladder or an investment purchase to provide some additional income.
No matter which path you took, there will eventually come a time when your mortgage term is nearing its end. You could sell up and upsize/downsize into a new property. Maybe you are looking sell your portfolio to the tenant or another buyer and look at other avenues? The most popular option however is a Remortgage.
First, let’s look at the definition. A Remortgage is where you use the proceeds from a new mortgage to pay off a pre-existing mortgage. There are a multitude of various options when taking out a Remortgage, ranging from minor to major.
Utilising the 20 years or so knowledge of our resident “Moneyman” Malcolm Davidson (host of our YouTube channel MoneymanTV), we thought it best to compile a quick guide to all the options you could have when it comes to taking out a Remortgage.
Your initial mortgage deal will normally last 2-5 years and feature low fixed rates or possibly discounted rates. In some cases, 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 lenders Standard Variable Rate (you may see this mentioned across the web simply as SVR). In short, an SVR is a mortgage with an interest rate that can possibly change depending simply 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 expensive paths to take, leaving many to look at Remortgaging for better rates, which will hopefully save you money on your monthly repayments.
2-5 years into occupying your home, you may decide that something isn’t quite right. Maybe you need an extra room or larger living space for your kids/belongings, a new kitchen, a new office, or a loft conversion. Rather than move into a larger house, many seek to release their equity with a Remortgage in order 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 would argue 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.
In the long run, this may prove even more beneficial as creating more space and having good quality craftsmanship will likely increase the value of your property, handy for if you ever do decide to sell up or rent out.
In some cases, people may simply wish to Remortgage in Hull for a better mortgage term, be that by reducing the length or switching to a more flexible product. Reducing the length does mean you won’t be paying back your mortgage for as long, so aren’t 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.
Some opt for a more flexible mortgage term when they remortgage. The benefits provided by this option can prove endearing to some homeowners. You may gain the ability to overpay, resulting in being able to pay your mortgage off as quick as you’d like, as well as being able to carry the same mortgage and rates over to another property, should you decide to move at any point in the future.
Though a flexible mortgage sounds near perfect, they usually come in the form of a tracker mortgage, which as mentioned earlier on follows the Bank of England base rate. This means one month your payments could fluctuate based on interest, making them a little unreliable.
Everyone has a level of equity in their property. This is worked out with the difference between what is still owed on the mortgage and the current value of the property. As touched upon briefly, this can be used for home improvements, however there are more options available for you out there.
Some use it to cover long-term care costs, to supplement their income, to have a holiday, to pay off an interest-only mortgage or to simply have free spending money.
In some cases, we find that Buy-to-Let landlords will use Equity Release as a means of covering their deposit for buying a future property to add to their portfolio.
On the topic of Equity Release, 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 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 always seek mortgage advice before choosing to consolidate and secure any debts against your home.
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.
An advisor will be able to discuss your circumstances and future goals, in order to create the best plan of action for you in the next step of your mortgage journey. It is our aim to ensure this go around is a quicker and smoother process than your first time.