Switching mortgages on a property you already own is known as remortgaging. It can be used in one of two ways to help your debt situation; to either reduce your mortgage payments, or to release a certain amount of equity in a lump sum in order to use as payment towards your debts.
Remortgaging – things to consider
If you’ve had a mortgage on your home for a considerable number of years, and the value of your house has risen significantly, then remortgaging might be a feasible way of restructuring your finances in order to address your debts.
By remortgaging you are taking out another mortgage product, and this may come with a significant arrangement fee, so this must be factored in to your calculations.
There are two main ways that remortgaging can be used: to release equity and to lower your mortgage repayments.
Remortgaging – releasing equity
If your house has enough equity, then remortgaging can be used to release some of the equity and use that money to go towards repayment of your debts.
This strategy is of course likely to increase your monthly mortgage repayment, so you must consider if remortgaging is likely to leave you better off or not. A mortgage repayment is usually considered to be a low-interest rate debt, whereas you may have other high-interest debts; paying these off through remortgaging might well lower your monthly repayments, but you need to be sure of your calculations.
Frequently Asked Questions about Remortgages
Remortgaging – lower your repayments
If you’ve had the same mortgage for a long time, then you may well be able to find a mortgage product that offers you a lower interest rate on the outstanding balance. Many people switch to a lower-rate mortgage to lower their monthly repayments, and this frees up more money which they can put towards repayment of their debts.
Remember that in order to remortgage, you may be required to pay an arrangement fee, although it might be possible to add this into the requested loan amount and then repay it over the term of the new mortgage. Bear in mind that any fees you include in the new mortgage will have interest charged on them for the duration of the mortgage, so you need to be absolutely sure that you’ll be better off – before you proceed with a remortgaging strategy
Thinking about remortgaging?
A remortgaging strategy might be a suitable debt strategy for you, but there may well be even more suitable debt solutions available to you, depending on your circumstances.
For advice on remortgaging as a debt strategy, call Payplan Financial Services FREE on 0800 980 4140 or use the online enquiry form
Not right for you? Read about other debt solutions that may suit you better: Trust Deed, Sequestration, Debt Arrangement Scheme (DAS), Low Income, Low Assets (LILA), Buy-To-Let Mortgage, Bridging Loan, Debt Management Plan, Full & Final Settlement, Self-Managed Arrangement, Equity Release, Debt Consolidation Loan.