Your Guide to Remortgaging and Consolidating Debt.
Considering remortgaging your home? There are numerous reasons to consider it, but just as many factors to weigh against. The decision that’s right for you hinges on your individual circumstances; there’s no universal solution.
Remortgaging your property can offer a means to consolidate debts, unlocking equity accumulated in your home to address other financial obligations. While this can potentially make your debts more manageable, be mindful that it might lead to an increase in your monthly mortgage repayments.
It’s crucial to carefully assess what you can afford and understand the new mortgage terms before proceeding. Consulting with a knowledgeable mortgage advisor can streamline this process, saving you time and effort. They can scour the market to ensure you secure the best available deal tailored to your needs, aiming to alleviate financial strain.
General Remortgage Overview
Essentially, when you remortgage, you transition from your existing or previous mortgage to a new arrangement. This could involve staying with your current lender or exploring options with a different provider altogether.Who is eligible for a Remortgage?
Anyone who owns a property and possesses a financial history that lenders find credible can potentially remortgage their home. While homeowners have the flexibility to remortgage at any point, it’s crucial to consider the terms of your current mortgage and any associated fees or penalties for remortgaging before the expiration clause. It’s advisable to consult with your mortgage broker approximately 4-6 months prior to the expiration of your current rate for best practices.When is the best time to Remortgage?
Many individuals opt to remortgage their home due to changes in their circumstances or the need for additional funds, whether it’s for a vacation, home extension, or personal reasons.
Remortgaging involves replacing your existing mortgage with a new, potentially more favourable, long-term plan. This can be beneficial if you’re facing financial difficulties and struggle to meet the obligations of your original mortgage deal.
It’s also advantageous if you wish to renovate your home, upgrade your kitchen, or extend the property. Funding for projects like adding an extra bedroom in the loft can be obtained through remortgaging. As you enhance the property and increase its value, lenders are more inclined to offer higher amounts and potentially better interest rates.Debt consolidation
The other very useful reason why you would want to remortgage your home is because of your desire to consolidate all your debts. Remortgaging for Debt Consolidation is common and since your repayment plan is essentially backed by property, 80% of lenders are more likely to accept this route.
How does it work?
Remortgaging for Debt Consolidation can be approached in a different manner. You need to establish how much all of your debts cost. Once you have calculated your outstanding debts you will have a figure that you can work with and speak to lenders about.
The next stage is to figure out your loan-to-value. Will your property price suffice for the debt? To do this you must add the amount of existing mortgage that is on your property to the amount you wish to borrow.
Divide your home’s price with the total new loan and then multiply that by 100 and you’ll know the overall percentage of the property value you intend to borrow. For example, £150,000 (total loan) divided by £250,000 (value) x 100 = 60%
Remortgaging for Debt Consolidation is one way to get yourself out of the debt avalanche. However, there are some things to consider before you get approved. Your credit score, how much equity is in your home/bank and the current house value are some examples. Also it is worth remembering that debt consolidation is secured against your home and is likely to cost more in the long run due to being added to the mortgage.
Working with a specialist mortgage broker can help you to understand what information a lender will be looking for and run through all these calculations with you. This will not only save you time and effort, but it can also avoid unnecessary hard checks on your credit history before having your application ready to send to a lender.
