The mortgage journey has its fair share of both ups and downs, but at the end of it all, you will end up with one of the following: either a potential future family home, a property that will be able to propel you further up the ladder or an investment purchase that can be used as an extra source of income.
Regardless of the path you took, there will eventually come a time when you are reaching the end point of your mortgage term. You could now sell your home and upsize/downsize into a new property. Maybe you are looking at selling your existing portfolio to the tenant or another buyer, with a view to invest in other areas? These aside though, there is one option that remains the most popular, and that option is a Remortgage.
First of all, let’s look at what exactly this means. A Remortgage is where you utilise the loan from a new mortgage to pay off your current ongoing mortgage. There are a large variety of different options when taking out a Remortgage, varying in scale of importance from minor to major.
By using the 20 years or so knowledge of our resident “Moneyman” Malcolm Davidson (host of our YouTube channel MoneymanTV), we worked hard to put together a quick guide regarding all the options you could have when it comes to taking out a Remortgage at the end of your term.
Generally speaking, your initial mortgage deal will normally last somewhere within the realms of 2-5 years, featuring low fixed rates or possibly discounted rates. Depending on your circumstances, you may even be placed on a tracker mortgage, a mortgage type that follows the Bank of England’s base rate.
When your term has come to its end, it is likely that you will be moved along to the lenders Standard Variable Rate (often referred to online just as SVR). To simplify, an SVR is a mortgage with an interest rate that can fluctuate both up & down, depending simply on what the lender wishes to charge. This does not work the same as a tracker mortgage as it does not follow the base rate of the Bank of England.
Because of this, these types of mortgages are usually the most expensive paths to take, leaving many with a preference in looking at Remortgaging for better rates, an act which will hopefully save you money on your monthly repayments down the line.
when you’re around 2-5 years into occupying your home, you may decide that it doesn’t quite feel like you’d hoped. You may be in need of an extra room or larger living space for your kids or personal belongings, a new kitchen, a new office, or a loft conversion of some kind. Rather than move into a larger house, many choose to take the route of releasing their equity with a Remortgage in order to cover the costs of these improvements.
Though the idea of having to obtain planning permission and fund/manage your own project may seem scary at first, some would argue it’s a lot less stressful and more rewarding than the process of selling your home, and finding and moving to a new one.
In the future this may prove to be quite a beneficial situation, as creating more space and having good quality craftsmanship will likely increase the value of your property. This is of course very useful for if you’d like to sell the property later down the line.
In many cases, people may simply just choose to Remortgage in Nottingham for a better mortgage term, either by reducing the length of their current term or switching to a product that is more flexible. Reducing the length means that you won’t be paying back your mortgage for as long, so aren’t completely tied down, but this will mean that your monthly mortgage repayments will be a lot higher. The longer your term, the lower the payments will be over the course of said term.
Some prefer to go with a more flexible mortgage term when they Remortgage. The positives that come with this option can prove endearing to some homeowners. You may end up with a chance to overpay, resulting in being able to pay your mortgage off a lot quicker, as well as being able to carry the same mortgage and rates over to another property, should you ever decide that you’d rather move at some point in the future.
Though a flexible mortgage sounds like it’s the most ideal situation to be in as a homeowner, they usually come in the form of a tracker mortgage. As mentioned previously, this follows the Bank of England base rate, meaning one month your payments could change both positively and negatively, based on interest. Some homeowners feel this is too unreliable for their liking.
Every homeowner has some level of equity in their property. The way this is worked out is by calculating the difference between what is still owed on the mortgage and the current value of the property. Further onto a previously mentioned point, this can be used for home improvements, however there are still an array of mortgage options available for you.
Some use the equity in their home to cover long-term care costs, to supplement their income, to have themselves a well deserved holiday, to pay off an interest-only mortgage or to have a surplus of extra cash to do whatever they’d like with.
We often find that Buy-to-Let landlords will use Equity Release as a means of covering their deposit for buying any properties in the future to add to their existing portfolio.
Another topic relating to the aforementioned topic of Equity Release, is utilising the existing equity in the property to pay off any unsecured debts you may have accrued over time.
Though it may seem like an easy enough task, Debt Consolidation not only bases the amount on how much you’re owed and the value of the property, but also how good or bad your credit rating currently is. This could mean you are only able to borrow a limited amount.
Furthermore, to pay off your previous mortgage and your debts, you will need to borrow a higher amount than your outstanding mortgage amount. This means your monthly repayments will probably be higher than you’d have initially liked. Though not an ideal situation, at least you can rest assured that should you find yourself struggling, a mortgage broker may be able to help you get back on track.
Should you find yourself with a particularly damaged credit rating, there are still some options to choose from, though these will be no easy feat and require very Specialist Remortgage Advice in Nottingham before proceeding with your process. Even then, there is no guarantee things will go the way you’d like them to.
You should always look to gain mortgage advice before choosing to consolidate and secure any debts against your own property.
If you are reaching the end point of your current mortgage term and are wondering what your option may be for Remortgaging, please feel free to Get in Touch with an fast and friendly mortgage broker in Nottingham.
A dedicated and experienced advisor will be able to discuss your circumstances and future goals, helping you create a plan of action for your next step of your home owning and mortgage journey. We always aim to ensure this time around is a quicker and smoother process than your first mortgage.