Re-mortgaging – finance for projects.

A mortgage, especially a first one, can be something of a burden. The need to raise the funds every month to pay the due instalment can loom very large in financial thinking. So why even consider re-mortgaging? There can be one or more of several reasons which all emanate from two basics.

The first basic reason is simply to get away from an existing mortgage which carries a rate of payment which can be improved upon. There is no intention or need to increase the level of debt; the idea is simply to move to a more competitive mortgage to reduce the level of repayments. If this is your intention you need to check what you would be paying by way of early repayment charges or exit fees.

At an early stage you should involve your current lender as you may find that they can move you to a better rate, and if you remain with them they may waive any charges for early closure of your current agreement. Ask for a redemption statement, which will tell you exactly what you have to pay if you do move to a new lender.

However, whilst looking at offers from other lenders, be sure to check out which if any of your costs they are prepared to cover. You will face legal costs, very likely a charge for a valuation or an arrangement fee – you may get a deal in which your new lender will pay at least some of these.

All costs and offers need to be examined carefully, to decide exactly how good any new deal will be.

The second basic reason for a re-mortgage is to raise cash from the equity in your property for whatever purpose may be required, and these can be many and varied! Getting cash into the bank to pay for a car or a holiday is not likely to be the main requirement; more likely is the need to pay off an expensive loan by debt consolidation funded from a (relatively) cheap mortgage.

Possibly, if you have no need and no wish to move house, you may want to use the money to improve and extend your present home, or possibly you will use the cash to finance new property for investment purposes or carry out repairs or modifications to an existing property which you rent out.

Which ever is the option you are looking at, you need to be fully aware that failing on payments could put your house at risk of re-possession, and it is important that you take out insurance to cover you for loss of employment or accident. Either of these occurrences could give you some serious financial problems if you do not have the cover. The costs of the insurance also need to be brought into the equation when you are deciding what move to make.

Flexible mortgages are worth examination, especially if your income is subject to the vagaries of self-employment etc. These allow you to adjust up or down the amount paid according to your circumstances at the time; there will be defined limits, so obviously you will not need to waste time looking for one which allows for nil payments! With this type of mortgage, juggling payments to cut the balance (and therefore interest owing) whilst leaving other payments until due can be a worthwhile exercise.

You could be facing quite a hunt if you are to establish beyond doubt  the best deal for your needs; why not enter ‘re-mortgage’ in your internet search engine and let  your computer take a lot of the strain? You will acquire a lot of information as re-mortgaging is an important source of business to lenders and to brokers, forming as it does around 1/3rd of the total mortgage demand. A recent report from The Council of Mortgage Lenders quoted re-mortgage figures of almost 100,000 for one month.

Although there is an undercurrent towards increased interest rates which could reduce the level of re-mortgages, the market is not reacting with any great concern. Interest rate stability seems to be reasonably assured and there is such a diversity of factors leading people into re-mortgaging that lenders believe that it would take a major upheaval in interest rates to have a significant effect.

Re-mortgaging it would seem is here to stay for the foreseeable future.