If you live in an older property and it is in need of repair or renovation, it is worthwhile thinking about a re-mortgage to fund the work that needs to be done. Renovating your property will add to its value and can be a good investment, given the current climate of the housing market, where prices in most areas of the country are still on the rise.
So What is a Re-Mortgage?
A Re-mortgage is simply the replacement of an existing mortgage with a new one. This can be done by either switching to a new lender or by getting a better mortgage deal from your current lender.
If you switch lenders you must make sure the savings you make will not be reduced or negated by any costs that may be incurred by making the move. Your current mortgage lender may have redemption or penalty fees which you may need to pay if you switch your mortgage. Your new lender may have charges too; they will want to value your house accurately so surveyor charges or conveyance fees will need to be met.
So if you are going to re-mortgage it’s important you do your sums correctly to ensure you get the most benefit by doing so.
Why Re-Mortgage and Not Just Get a Loan?
A re-mortgage is a far better option than a loan for renovations. Renovation loans will normally have a higher interest rate and have to be repaid over a shorter period than a re-mortgage. As well as repaying your loan you will still have to pay your current mortgage, so an increase in outgoings is likely.
Re-mortgaging can help you save money by reducing your monthly payments. When re-mortgaging you have the option of taking your new mortgage out over a longer period of time than your current mortgage, this will help reduce payments. The value of your house will probably have increased since you took out your current mortgage so you will also be able to free up some of this cash in your home and borrow more against the value of your property if you need to.
Whether the renovations you want to do involve structural work, a new kitchen, building an extension or a conservatory make sure you get accurate quotes for the work before going to arrange your re-mortgage. Once you get the quotes you should add at least another 10% to the amount to cover unforeseen or extra costs that might occur during the renovations. It’s this figure you should have in mind when you look for a re-mortgage.
Failure to do so may mean that money borrowed might not cover the costs of your renovations, leaving you with a house that is incomplete and of less value than when you first started.
How do I Find a Suitable Re-Mortgage?
One of the first things to do is shop around and find a lender that is going to meet your specific requirements. There are a huge number of lenders offering various products with varying rates, so it’s important that you know exactly what it is you want. You should ask yourself:
- How much you want to borrow?
- How much can you afford in monthly repayments without reducing your standard of living.
- Over how long a period you’d like the new mortgage term to run.
Once you have decided on these factors only then should you set about finding a lender that fills these specific needs. Look for lenders that offer free valuations and legal fees this could save you quite a considerable sum.
Remember re-mortgaging for a larger loan that allows you extra money for renovations may work out cheaper than what you currently pay. Not only could re-mortgaging save you money, but the renovations and improvements you make to your home will increase its value.