The mortgage journey is truly an adventure to behold. Though you will face your fair share of both highs and lows, in the end you will end up with one of the following: either the property of your dreams to settle down in and maybe start a family, a stepping stone property to help you find your footing on the property ladder or an investment purchase to provide some additional income.
No matter the path you ventured down, there will eventually come a time when your mortgage term is reaching its end. You have the option to sell up and upsize/downsize into a new property. Maybe you are in the market for selling your portfolio to the tenant(s) or another buyer and look at other financial opportunities? The most popular option however, over all of the above, is a Remortgage.
First, let’s look at the definition. A Remortgage is a process of using the funding from a new mortgage to pay off a pre-existing mortgage. There are lots of different options when taking out a Remortgage, ranging from minor to major.
By taking advantage of the 20 years or so knowledge of our resident “Moneyman” Malcolm Davidson (host of our YouTube channel MoneymanTV), we thought it would be beneficial to everyone, if we put together a quick guide to all the options at your disposal when it comes to taking out a Remortgage.
Your initial mortgage deal will normally last somewhere between 2-5 years and feature low fixed rates or possibly discounted rates. In some cases, your lender may even place you on a tracker mortgage, which follows the Bank of England’s base rate.
When your mortgage term comes to an end you will likely be placed on the lenders Standard Variable Rate (you may see this referred to simply as SVR). The purpose of an SVR, is that it is a mortgage with an interest rate that can possibly move up or down, depending on what the lender wishes to charge you. This does not follow the Bank of England’s base rate like a tracker mortgage and as such can be a little more risky, as the lender is not legally obligated to charge the recommended amount.
Because of this, SVR’s are usually the most expensive paths to take, leaving many to look at Remortgaging for better rates, which will hopefully save a little bit of money on monthly repayments.
After your 2-5 year term into occupying your home, you may decide that something doesn’t quite fit. Maybe you need an extra room or larger living space for your kids or belongings, a new kitchen, a new office, or a loft conversion. Instead of just moving into a larger house, many seek to release their equity with a Remortgage in order to cover the costs of any work needed or wanted.
Though the idea of having to obtain planning permission and fund/manage your own project seems scary, some would argue it’s a lot less stressful and more rewarding than the process of property hunting, selling your current home and moving your possessions.
As time passes by, this may prove even more to be a wiser option, as creating more space and having good quality craftsmanship will likely increase the value of your home. This comes in handy for if you ever do decide to sell up or rent out.
In some cases, some homeowners may wish to Remortgage in Manchester for a better mortgage term, whether that be by reducing the length or switching to a more flexible product. Doing this will mean you won’t be paying back your mortgage for as long, so you won’t be tied down for the rest of your life. However, this route will also mean that your monthly repayments will be a lot higher. The longer your term, the lower the payments will be over time.
Some opt for their mortgage term to be a little more flexible when they remortgage. The benefits provided by this option can often sway homeowners in its favour. You may gain the ability to overpay, resulting in being able to pay your mortgage off quickly, as well as being able to carry the same mortgage and rates over to another property of your choosing, should you decide to move later down the line.
Though a flexible mortgage sounds like the ideal situation, they usually come in the form of a tracker mortgage, which as discussed in an earlier point, follows the Bank of England base rate. This means your payments could fluctuate based on interest, making them a little unreliable each month.
Everyone has some variance 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 your property. As touched upon earlier in this article, equity can be used for home improvements, however there are more options available with this.
Some use it to cover long-term care costs, to add to their income, to have a holiday, to pay off an interest-only mortgage or to simply have free money to spend on whatever they would like.
In some cases, we find that Buy-to-Let landlords will use Equity Release as a means of covering their deposit for purchasing further additions to their property portfolio.
Another big one people use Equity Release for, is to pay off any unsecured debts that may have built up over a particular length of 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 it also factors in your credit rating. This could mean you are limited in the amount you can borrow for a property.
Additionally, to pay off your previous mortgage and your debts, you will need to borrow more than the mortgage amount you have left. This means your monthly repayments will most likely be higher than expected. Though not a perfect circumstance to find yourself in, at least you can rest assured that should you find yourself in need of a way out, you do have some options to choose from.
Should you find yourself with a damaged credit rating, you do still have a chance to obtain a mortgage, though these will not be easy and require very Specialist Remortgage Advice in Manchester before even proceeding. Even then, there is no guarantee that it can even happen.
You should always seek mortgage advice before choosing to consolidate and secure any debts against your property.
If you are reaching the end of your term and are looking at what your option may be for Remortgaging, it will be beneficial for you to Get in Touch with an experienced and trusted mortgage broker in Manchester.
An advisor will be able to discuss your circumstances and future plans, in order to create the best plan of action for you in the next step of your mortgage adventure. It is our aim to ensure this go around is a quicker and easier process than when you took out your initial mortgage.