A popular way of raising extra cash for home improvements or to fund a large expense is to remortgage your house. Remortgaging has become very popular in the last few years and is especially attractive to people whose houses have increased significantly in value from when they first got their mortgage.
For example if you first took your mortgage out 10 years ago, your house may have cost you £180,000. Now, 10 years later it may well be worth £250,000, so it’s increased in value by £70,000. You can’t spend this £70,000 however unless you sell your house. By remortgaging you get access to this £70,000.
Remortgaging works by switching your mortgage deal to a new one that releases equity and is more suitable for you. Remortgaging can extend the term of your mortgage and reduce the monthly repayments or you can keep your existing mortgage repayment schedule, often at a cheaper cost.
Using the above example, let’s say you’ve a house in Manchester that you bought 10 years ago for £180,000. It’s now worth £250,000, and you’ve got £130,000 left to pay on your mortgage, with monthly repayments of £900. Let’s also say that you want to raise £20,000 for some home improvements. Here’s how it works:
You remortgage your house, stopping your old mortgage arrangement and setting up a new one but instead of borrowing the outstanding £130,000 you borrow £150,000. You can set the term to 25 years or keep your existing one. With interest rates considerably lower now than they were 10 years ago when you bought your house you’ll find that you have been able to borrow more money but are paying back less because of the lower interest rate!
Remortgaging your house makes great sense for many people.
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