remortgaging basics

If you have a mortgage, you are certainly interested in learning how to manage it effectively. One of the main options that you have is remortgaging. Find out how it works and how to make the most out of it.

Remortgaging Basics

In the case of remortgaging, you are the seller taking your existing mortgage back to the marketplace, virtually speaking. Your goal is to get lenders including your current lender to compete for this business of yours once again. There are many different things which you can achieve with this move. The list includes securing a lower interest rate, borrowing more money and getting a brand new home loan.

With remortgaging, you will get your home loan to correspond to your new financial situation. No matter whether the loan was granted 10 or 2 years ago, the situation has certainly changed and you would want the mortgage to reflect it so that you can use it efficiently. Improvements in your financial situation such as a salary increase, increase in the value of your property or the receipt of inheritance are all reasons for taking this stem. These positive changes make you less risky as a borrower and you would want to take full advantage of this.

Another reason for remortgaging is the ever growing range of home loans available in the market. You can now select from more products than you could just a year or two ago. This allows you to reach your financial goals more easily. You can go for a mortgage with more flexible payments to match your lifestyle. It is also possible to have the interest rate fixed if you worry that it may increase considerably in the future.

In order to get the best remortgaging deal, you should turn to a specialist consultant or broker. It is essential for the financial service provider to be highly experienced in these types of deal. They must know the rules and regulations of the National Credit Act very well in order to ensure that you qualify and that you will be able to go through the entire process without hassle.

The main reason for remortgaging your existing bond is simple. You can save quite a lot of money. If there has been a major increase in your income and/or in the value of the assets which you hold over the past few years, you are highly likely to quality for a home loan with better terms and conditions and lower interest. For best results, you should familiarize yourself with the situation in the mortgage market and exploit it fully.

Reasons for Remortgaging

This strategy can be highly effective for the following things:

Debt consolidation

Your mortgage is secured with your property. This is the reason why it has a much lower interest rate compared to all unsecured loans and lines of credit which you use. These include personal loans, short term loans, overdrafts and credit cards. Instead of repaying many different loans with high interest rate, you can bundle them with your mortgage which is secured by your property. This will save you money and give you extra disposable cash during the month. In general, when you make large purchases, it is always wise to use a secured loan backed by your property as it is the cheapest form of credit available.

There are two main points which you should consider carefully when consolidating debt. Firstly, you will be able to top up your mortgage only by the amount of equity which you already own in the property. You will not be able to borrow more.

The other point which you need to take into account is that with debt consolidation, the short term loans and lines of credit which you consolidate turn into long term debt. This is because you will have to repay them over the remaining term of the mortgage. The longer this term is the longer interest will be charged for. This can make the repayment more expensive even though you will enjoy smaller monthly instalments. The best strategy in this case is to make as large monthly payments as possible plus additional contributions whenever you can. This will allow you to repay your mortgage and other debt more quickly and save on interest.

Home Improvements

It makes great sense to finance home improvements with remortgaging for two reasons. Firstly, this is the cheapest finance which you will get. Additionally, the improvements will add value to your property and this will automatically give you more equity to use in any way you like. Any lender is highly likely to approve you for such a deal. In fact, they may offer funds exceeding the expenses which you have and corresponding to the increase in equity which you will enjoy.

Better Mortgage

You should definitely consider taking out a new mortgage which reflects your current situation and your future financial plans in a better way. You can choose a product of any type and with any features and terms and conditions. Pick the most affordable and cost-saving product for you.

Lower Interest Rate

If your financial circumstances have improved compared to the time when you took out your original mortgage, you will have high chances of securing a lower interest rate. When you work with a mortgage specialist, the professional will take into account various important factors to produce an estimate of how much your interest rate will decrease. Just a small percentage decrease can lead to considerable savings in the long term.

The best way to go about remortgaging is to use the services of a specialized consultant. The professional will consider not only the bond products available from your current lender but also all other suitable options available in the market. This will give you the highest chances of securing the most favourable deal.

Finally, even though remortgaging is fairly new in South Africa, it is widely used as a financial strategy in many other parts of the world. It is efficient and easily available. It has a huge saving potential which you should definitely exploit.