On an overall basis, the mortgage process can often come across as quite surprising and applicants can expect to experience their fair share of both ups and downs. Some applicants may receive a quick and easy process whereas others may find it a lot more challenging trying to reach mortgage completion.
Regardless, once you have secured your first property, moved in and lived there for almost the entirety of your term, you will eventually reach a point where you have to make some choices from which path to take next. First of all, you could have the option to sell your current home and move into a new home.
Alternatively, if you feel like you’ve already found the home you want to stay in for the rest of your life, you may look to remortgage for home improvements. Common choices for this include to fund either an extension or conversion.
In this article, we are going to take a look on remortgaging and the various reasons why people may look to take out a remortgage in Sunderland.
A remortgage is where you take out a new mortgage to pay off the mortgage you already have. There are lots of different options to choose from at the point of remortgage, it’s entirely your choice.
As a general rule of thumb, you will take out a remortgage each time you reach the end of your fixed mortgage term. If you opt to not take out a remortgage, you may find that you possibly fall straight onto your lender’s standard variable rate of interest, which will probably be more costly than the rate you’re currently on.
The mortgage deal that you’re on initially will likely last for near 2-5 years. As touched upon previously, if you don’t remortgage, you will move onto your lender’s SVR.
Sometimes, their own rates can be higher than that of a tracker mortgages (track the Bank of England’s base rate), so in the long run this could cost you more than you would otherwise need to pay.
If your mortgage term ends, you may also find yourself falling onto a tracker mortgage. The interest rates of a tracker mortgage will go up and down depending on how the current United Kingdom economy is performing.
As an example of this, during the coronavirus pandemic (March 2020), the Bank of England’s interest rate was much lower than it usually is, as the economy wasn’t performing at it’s best. Over time, the economy recovered, causing the interest rates to rise once again.
It’s reasons like this why people often remortgage to find themselves a much better interest rate. Homeowners look to find themselves a better interest rate in a bid to lower their monthly mortgage repayments.
Rather than moving home in Sunderland, a lot of homeowners look to make modifications to their existing home, so that they can create more space through either a home extension or loft/room conversion. Some will also remortgage to fund other smaller home improvements such as doing up the kitchen or living room.
The way that this process will work, is when you take out a new mortgage product, the costs for any home improvements will be incorporated into your mortgage. This means that your monthly payments and mortgage term will likely increase.
If you already are wholly fond of the house that you have, making improvements over moving could save you a lot of money. It can potentially be easier, less stressy and provide more benefits in doing so, that the stress and cost of moving home.
As a long standing mortgage broker in Sunderland, we’ve regularly seen mortgage applicants that have realised further down the line that they would prefer a different product, however, they are already mid-way through their existing term.
It might just be that they are wanting a more flexible product that will allow them to reduce their mortgage term. Though this could mean a monthly mortgage payment increase, it could mean their mortgage term will decrease.
A flexible mortgage could give you the option to overpay your mortgage payments do that you can pay it off quicker. Usually, people choose to remortgage if they’ve maybe had a pay increase or been given a large lump sum of money, i.e., through being made redundant at work.
Some people may even want to keep the same monthly payments and still stay on their current base rate. When this is the case, you may have the option to remortgage for a term extension.
As a homeowner, it is likely you will have some equity built up inside of your home. You can turn this equity into cash, which is why people often remortgage to release equity.
The amount of equity that will be in your home can be calculated by taking away the remaining amount on the mortgage from the value of the property. A portion of the amount that is remaining can be taken out and used for whatever you’d like (within reason).
It’s up to you what you spend this money on. As mentioned, some use it for home improvements, others use it for a deposit for another property (common with buy to let landlords) and some use it for paying off car loans or taking a holiday. It’s entirely your choice.
You can also release equity through taking out a lifetime mortgage. This is often targeted at older homeowners who are looking to release some extra funding for their living circumstances.
Firstly, debt consolidation is considered a very specialist subject, so we would highly suggest that you speak with a mortgage advisor in Sunderland before making any sudden decisions.
Consolidating debts means you will be incorporating unsecured debt into your mortgage. Doing this will increase your mortgage payments and can also increase your mortgage term too.
All lenders have a different perspective when it comes to consolidating debts into a mortgage. Some lenders are fine with it and some don’t have it as an option. Lenders often don’t allow it, as you are placing existing unsecured debt into a secured asset.
This means that if for one reason or another you can’t meet your mortgage payments and start to accrue any debt, your property is repossessed. In doing this, the lender will lose out on money as the debt you have is now secured within the property.
The subject can be quite difficult and is something that you should get specialist help for. For debt consolidation and remortgage advice in Sunderland, you should contact our excellent mortgage team, taking advantage of the free mortgage appointment we offer.
Having now read about the various reasons why people may look to remortgage and how they work, maybe you think it’s time to start looking at arranging your remortgage?
Whether you’re looking to remortgage for better rates, for home improvements, for a more flexible term, to release equity, to consolidate your debts into your mortgage or for something else we haven’t mentioned here, one of our dedicated mortgage advisors in Sunderland will have likely had experience in helping someone remortgage for that reason before.
If you would like to have a chat with a remortgage advisor in Sunderland about remortgaging your property, feel free to give us a call and speak to a member of our team. We will be more than happy to try and help you through the remortgage process and get back to life as normal.