Re-mortgage

Remortgaging to release equity and cash from your home as way a good to remortgage to pay off debts or invest in property or business

Why re-mortgage?
The reason homeowners remortgage to a new loan is to cut their monthly mortgage repayments. Though,some do so in order to release some of the equity they have built up in their property, which can be used home improvements, repaying other debts, other busniness purposes or offering financial help to family or loved one

Equity release in brief:

What you need to know about releasing equity. 

Equity is a term that refers to how much of the property you own outright. So if you bought a property with a 15% deposit, then you would own 15% equity in the property. The level of equity you own in the property will usually go up as you repay the mortgage, since the outstanding debt will represent a smaller proportion of the overall value of the property. While you might have taken a mortgage at 85% loan-to-value when buying the property, a year later that may have fallen to 90%, meaning the equity you own has increased from 15% to 20%. Another way the equity you own can increase as the property increases in value.
Most first-time buyers now depend on financial assistant from their family and loved ones in order to get onto the housing ladder, this could be in the form of a gifted deposit. You may also be considering remortgaging to free up cash to pay off some debts.

The real positive of releasing equity is to unlock some money which you can put to use, whether it’s to consolidate other debts, pay for home improvements or to gift to a family member it is important to note tht you are increasing the size of your loan and your monthly payment. Depending on the mortgage you go for, this may mean your monthly payments goes up. House prices can go down as well as up and if house prices goes down the equity you have built up could quickly be decrease leaving you in negative equity.

The your outstanding loan is larger than the value of the property and negative equity can make it very difficult to remortgage or move home in the future.

You could face early repayment charges (ERC) and exit fees for moving from your current mortgage to the new lender if you remortgage during the initial fixed or tracker mortgage period, then you may need to pay an early repayment charge (ERC).  An ERC is calculated as a percentage of the outstanding loan and so can be a huge outlay. for instance a 5% ERC on a £200,000 mortgage works out at a £10,000 penalty charge, which would decrease some of the equity you could release by remortgaging.

ERC will not normally be charged once you have finished this initial period and moved onto your lender’s standard variable rate. Other fees may apply as well as the ERC, such as exit fee to cover the administration of closing your account. Moving to new loan usually attract product or arrangement, which may cost around £1,000 though, this may be added to the mortgage balance which attracts interest, costing you far more, other fees may include the legal side of the remortgage, broker’s fees.  However, many lenders may likely cover these fees as part of their offer so it is important to compare various re-mortgage products before to get the right re-mortgage product that suits your needs.

For more information please contact  us for a free quote.