Should I remortgage to pay off other debts?

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Remortgaging can definitely be a good move to make in the correct circumstances but when you have mounting debts is choosing to remortgage your biggest asset really the best idea?

When you are looking to remortgage it can all seem a bit overwhelming so the best place to start is by booking an appointment with a qualified mortgage broker. They will be able to advise you on the best deals that would suit both you and your financial needs.

What is Remortgaging?

In plain English remortgaging is when you obtain a new mortgage on a house that you already own. The process is very similar to when you originally obtained your mortgage. It can help you to save money or allow you to access a lump sum through the equity in your home. 

Why Should I Remortgage?

The answer to this will vary between each individual household. It is a very personal decision and will depend on your own set of circumstances. However there are several main reasons people may choose to go down the remortgaging route. 

  • Your fixed rate may be ending and you are now being moved to a variable rate. This could cause your monthly repayments to increase. 
  • If you have paid off a reasonable amount of your mortgage, by remortgaging for a lower amount you could be able to access a better deal and in turn obtain a lower monthly repayment. 
  • You may be looking to release some equity from your home and by remortgaging for a higher amount you would be able to access some of this money. 

Can I Remortgage To Pay Off My Debts? 

The quick answer to this is yes. By releasing equity in your home you can then use this money to consolidate your debts. You would need to remortgage for a higher amount though.

What is equity? You do not own your house until you have paid off the entire mortgage, however the equity is the amount of the house that you have paid off and therefore own outright. 

Example – 

  • You purchased your house for £200,000
  • You paid a deposit of £20,000
  • Your mortgage amount was for £180,000
  • You have paid off £20,000 

Providing your home is still valued at £200,000 you would now have £40,000 equity. This is your deposit amount and the amount you have paid off your mortgage since you purchased your home. 

Your mortgage would currently stand at £160,000. By choosing to remortgage for a higher amount, for example £180,000, you would then have access to £20,000 equity leaving the remaining £20,000 in the house.  

Note: If you do not want to remortgage for a higher amount you could choose to remortgage for the remaining £160,000 left on your original mortgage, meaning you could potentially obtain a better deal and lower monthly repayments. This would leave you with more disposable income to help with your debt repayments. 

What Is The Remortgaging Process?

Remortgaging works in the same way as when you would have obtained your original mortgage. 

  1. Mortgage In Principle – This is the first step and although it is not a guaranteed mortgage, it does give you a good starting ground to see what a lender would be willing to let you borrow. 
  2. Application – Once you have your mortgage in principle you are then able to make your full application. The lender will carry out a full credit check and will also need to see proof of your income and expenditure. 
  3. Completion – As with all mortgages the completion is handled by your Solicitor and Conveyancer. 

Before jumping into a remortgage to help you clear debts it is wise to take note of these points. 

  • By increasing your mortgage amount you will more than likely increase your monthly repayments. You will need to show your potential new lender that you will be able to meet this monthly demand. 
  • Your credit score must be in a reasonable and stable position. A lender will want to see that you are able to keep on top of your current finances to show that you are a good creditor. 
  • What are the current fees for leaving your current mortgage? Many lenders will charge you an exit fee or an early repayment fee that can sometimes run into the thousands of pounds. 
  • There are also fees attached with remortgaging. These include an application fee, a valuation fee and your legal fees. 

When you are looking to remortgage it can all seem a bit overwhelming so the best place to start is by booking an appointment with a qualified mortgage broker. They will be able to advise you on the best deals that would suit both you and your financial needs. 

Did You Know Homeowners Like You Could Save £1000s On Mortgage Repayments?

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