Remortgaging to release equity
If the value of your home has increased since you took out your mortgage, then you may want to consider releasing some equity via a remortgage. This basically involves siphoning off some cash from the portion of your property that is mortgage-free thanks to your monthly repayments.
In recent years this has been a popular reason for remortgaging, given rocketing UK property prices over the past decade. However, as house price growth has now started to slow, you should weigh up the pros and cons carefully before choosing to remortgage to release equity. What impact will topping up your homeloan have on the equity left in your home if the value falls in the near future? Could you be left with hardly any equity left in your home or even owing more than the value?
Calculate your remortgage fees
It is essential that you do your sums before you remortgage - there's no point in going through
the process only to find that you're financially worse off afterwards. Firstly, make sure the interest rate you are offered on your new mortgage is competitive. You may also have to pay for a valuation and legal fees, admin costs and other arrangement fees, plus an exit fee for paying off your current mortgage - it's important to work out all these costs and factor them into your calculations before making a final decision.
In the long run, remortgaging could work out to be a cost-effective way to consolidate your debts. But you must get the maths right. A financial adviser could help you to work out the figures if you feel you need help making the decision.
