When buying a home, you never usually expect to need to remortgage it. A mortgage is taken out and is typically added as a first charge on the property deed to reflect that money is owed on the property.
Remortgages are taken out for a variety of reasons – it might be for an improvement project like an extension on the house, a way to help in clearing consumer debt or an adjustment to how much the mortgage is costing every month.
In this article, we’ll look at when it makes sense to remortgage a property and what’s involved in doing so.
Large Home Improvements vs. DIY
A home improvement project like getting planning permission to add an extension to the back is a great idea. It will add to the value of the property and increases its attractiveness at resale too. As such, the larger mortgage after replacing the existing mortgage with a new one is likely going to be worth the cost in fees and interest on the large loan.
Where it doesn’t make as much sense is when you are doing repeated DIY projects at home that would be considered fairly small or minor. In this case, spending a few thousand pounds to redo the bathroom is best if you’ve saved up first. Alternatively, taking out an unsecured personal loan is going to be quicker to pay off and avoids adding too much extra debt to the largest asset you currently own.
Debt repayment or consolidation is often cited as a reason to get a remortgage. Increasing the size of the loan on the home can release some equity to repay consumer debts.
This approach swaps out more expensive personal loans, overdrafts and/or credit cards for less expensive, longer-term mortgage debt. It’s important to run the numbers to determine which option is the least expensive. The most important point, though, is to cut up credit cards that have given you trouble after repaying them through a remortgage to avoid a repeat of the same situation.
Getting a remortgage is also useful when you either want to add more years or to reduce them to get the mortgage clear sooner.
Sometimes, it’s possible to get a reduced interest rate, too, which can save money after fees, instead of sticking with the existing bad deal. Again, run the numbers to see what makes sense. You can consult your trusted financial advisor and see if a 10-year fixed refinance rate is the better option.
What’s Involved in Getting a Remortgage?
A remortgage includes securing a new mortgage, repaying the existing one and dealing with all the paperwork required.
You’ll certainly need a solicitor who is capable of handling the transaction, sorting out removal of a first charge on the property and adding a new one for the remortgage. Using a remortgage conveyancing solicitor, they’ll have experience about what to do and will avoid any costly mistakes along the way.
When you want to make your home bigger or better looking to give it the wow factor, remortgaging your home makes sense. Just ensure that you get some major improvements completed at the same time to make it worth it.