Buying a home is likely to be the biggest purchase you’ll ever make, and a mortgage will be your largest debt. Nevertheless, your mortgage journey will have its ups and downs, but you will end up with one potential outcome once your term ends.
Either you will have a home to settle down in, a property that you can use as leverage to get a better property, or an investment to help boost your income. You will reach a point where your term is coming to a close, and you need to consider your options.
While some look to sell their home and upsize/downsize into a new property. Others may sell their portfolio to the tenant or another buyer to look for alternative ventures. However, we often find that people decide to Remortgage their property instead.
Remortgaging means switching your current mortgage deal to another mortgage deal. You can choose to remortgage with either your existing lender or a different one. Your new mortgage will then replace your old one.
Utilising over 20 years working in the mortgage industry, the “Moneyman” himself, Malcolm Davidson, put together a helpful Remortgage guide for those looking at what they can do next when their term is ending.
Generally speaking, your mortgage deal will last around 2-5 years and feature low and potentially discounted fixed rates. Although, you may find yourself placed onto a tracker mortgage, which will follow along with the Bank of England’s base rate.
A standard variable rate (SVR) is an interest rate set by your lender. It is the default interest rate that you move onto when their initial deal ends. If you choose not to remortgage, you will automatically move onto your lender’s SVR.
In most cases, the SVR can be considerably higher than the interest rate you were previously paying, so your monthly repayments will rise. Because it is a variable rate, your lender can also change the SVR at any time.
Compared to a tracker mortgage, a Standard Variable Rate will not follow the Bank of England’s base rate.
Having adjusted to being a homeowner for several years, you might feel like something needs changing. Some might want an additional room or more living space, a new kitchen, an office to work from home, or even a loft conversion.
Rather than find a bigger home to move into, many homeowners preferably look at releasing their equity with a Remortgage to cover the costs of home improvements.
Once you have obtained planning permission and funding/managing, it can be a pretty stressful experience. However, most homeowners would agree that it’s a lot more rewarding at the end than it would be trying to get a new property and looking to move elsewhere.
Remortgaging for home improvements has many benefits, as opening up lots of space within the property and having a high-performance home is likely to increase the property’s value. Which can help if you ever decide you want to sell up or turn it into a rental property.
Sometimes some homeowners look to Remortgage in Lincoln to gain access to a better mortgage term, whether this is achievable by decreasing the length of the term or switching to a more manageable mortgage product.
By reducing the length of your term, you are cutting short on how long you pay back your mortgage so you aren’t tied down. However, this means that your monthly repayments will be higher.
The longer you set your term for, the lower your payments will be.
In some cases, homeowners choose to take out a more flexible mortgage term when looking to Remortgage as a means to gain the benefits they may have for doing so.
For example, you may be able to overpay with this mortgage, leading to your mortgage paid off a lot quicker and being able to take the same mortgage and rates with you across to another property if you ever do decide to relocate.
Some felt like a flexible mortgage sounds more suitable, though they tend to be tracker mortgages, which, as we have stated before, will follow the Bank of England base rate.
This means your payments could vary depending on interest.
Everyone will have some amount of equity existing within their property. You can work out the amount by looking at the difference between what’s left on the mortgage and the properties current value.
Most homeowners choose to use the equity to fund home improvements. However, you can use the money for other things. Some choose to use their equity to cover long costs, go on holiday, pay off an interest-only mortgage, or give them some additional spending money.
We tend to see Buy to Let landlords using Equity Release to cover their deposit for buying another property to expand their portfolio.
On the subject of Equity Release, we also find that many people will pay off any unsecured debts they may have gained over time.
Debt Consolidation may look like a straightforward process, but there are many factors in the amount you owe, how much the property is worth and the state of your credit rating, thus limiting the amount you can borrow.
To pay off any previous mortgage and debts, you need to borrow a much higher amount than your mortgage, making your monthly repayments much higher. Though it isn’t great, at least you know there are some options should these problems arise.
If you have a ruined credit rating, there may be options out there for you, and you are best speaking with a Specialist Mortgage Advisor in Lincoln before you go ahead with these. But keep in mind even talking to a Mortgage Advisor, you are still not guaranteed to get a mortgage.
We always recommend to all that you get professional Mortgage Advice before you look to consolidate and secure any debts against your home.
If your mortgage term is coming to an end and you would like to know your Remortgage options, get in touch to speak with one of our Mortgage Advisors in Lincoln and book yourself in for a free mortgage appointment.
We will take a look at your situation and look at your best options to see the next step of your mortgage journey. We aim to ensure that your mortgage process this time around is a lot smoother and quicker than previously.