Remortgaging refers to replacing your existing mortgage with a new mortgage deal—either with the same or different lender—while staying within the same property.
Since remortgaging releases cash from the equity in your property—and if the value of yourproperty has increased significantly—it may seem like an easy route to get your hands on some cash to reduce debts. However, that isn’t always the case.
In reality, you’re taking on a bigger loan, paying more in repayments each month, in addition to building on the interest you owe.
Things to Consider Before Mortgaging To Consolidate Debt
When remortgaging, the lender looks at your existing mortgage deal and the value of your property.
Based on your credit file and application, the lender decides how much they think you can afford to repay.
If you remortgage to pay off debts, you might end up borrowing more than your outstanding mortgage. This just means bigger loans and even bigger repayments.
Yes, you’ll be able to pay off debts, but you’re essentially left with higher mortgage payments. Will this actually improve your financial situation?
Remember: debt consolidation only works if you stick to a plan and don’t rack up new debt. It should be used as the last resort.
Do You Have Enough Equity To Remortgage?
Remember, you can only remortgage to pay debt if you have enough equity in your property. In case you do have enough equity, consider all alternatives before remortgaging. If your mortgage is already around 80% of the property value, a remortgage could prove to be quite costly.
Risk of Repossession
A mortgage is a secured debt—and while a secured borrowing may sound better, it isn’t. It gives the lender the right to take your home if you’re unable to repay. The lender’s losses are limited and they can easily take your assets.
Therefore, it’s always better to have UNSECURED lending, so that if you can’t repay, your property is safe (or at least it’s a lot more difficult to take it.)
By getting a bigger loan to pay off debts, you’re converting unsecured debt into secured debt.Don’t put your property in jeopardy.
Speak To an Expert
If you’re in debt, you’ll need the help of an expert to develop a strategy and work out the best way to borrow. Get in touch with the mortgage advisors at Sterling Capital—an award-winning mortgage advice firm.
Their best mortgage brokers London offer a wide range of services, including guidance with mortgaging, remortgaging, first-time home buying, and much more.
Call them today for more information!
|Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.|