You’ll likely have both your highs and your lows throughout your mortgage process, but when all is said and done, it will all result in one of the following outcomes: either a possible future home for your family, a property that will shift you along the property ladder or a purchase you can use as an investment to boost your income.
No matter which route you find yourself going down, you will eventually start getting near the end of your mortgage term. Some look to sell their home and move into a new property. Others maybe look to sell parts of their property portfolio with an aim to look at other areas to invest in.
More popular than these though, is taking up the route of a remortgage in Bristol.
Before anything else, let’s take a look at what a remortgage is.
A remortgage is where you use the loan that you gain from a new mortgage to pay off your existing mortgage. There are lots of different options that are available to customers when taking out a remortgage, with these options varying in scale of importance.
In utilising the experience of our director and twenty year mortgage expert, the “Moneyman” Malcolm Davidson (host of our YouTube channel MoneymanTV), we have compiled a helpful remortgage guide, reflecting on all of the options that may be available towards the end of your mortgage term.
In the case of most mortgages, the deal that you are initially set up on will last somewhere around two to five years, featuring low fixed rates or rates that are possibly discounted. Depending on your personal situation, you may even be placed on a tracker mortgage, which is a mortgage type that will follow the Bank of England’s base rate.
Once your term has ended, the chances are that you will be moving onto the lenders Standard Variable Rate (you may see this shortened to SVR). To explain what this is; an SVR is a mortgage with an interest rate that can potentially change, depending simply on what the lender is looking to charge you.
This does not work the same as a tracker mortgage as it will not be following the base rate of the Bank of England. Because of this, these types of mortgages usually cost a much larger amount to take, leaving many to just prefer looking at remortgaging for better rates, something that would hopefully save you a lot of money in the long term.
Once you have reached the point of being 2-5 years into occupying your home, you may feel like something is off and it needs to change. You may need to create an extra room or improve upon the size of your living space for your kids or personal belongings.
Some people would like to build a new kitchen or office. We actually hear of customers looking to build some kind of loft conversion. Instead of just packing up and moving home, lot’s of homeowners instead opt to remortgage as a means of releasing equity to fund these new projects.
Of course, obtaining planning permission and funding or managing your own project does sound big and scary, lots of homeowners would argue it’s a lot less stressful and more rewarding than it would be to just sell your home, and find somewhere else to live.
In the future this may prove to be quite beneficial to you as an investment. This is because creating more space and having good quality craftsmanship has a chance to increase the value of your home, which in term would come in very handy for if you do look to sell your home in the future.
In a lot of cases, homeowners may just want to remortgage in Bristol for a better mortgage term, either by reducing the length of the term they are on at the current moment in time or by switching to a different product that is a bit more flexible.
By reducing the length of your term, you will not be paying back your mortgage for as long, so you aren’t completely stuck there, but this does mean that your monthly mortgage repayments could be higher than anticipated. The longer your term, the lower your monthly payments will be.
Many homeowners take preference to more flexible mortgage terms when they take out a remortgage. There happens to be a few positives with this route that homeowners prefer. Some of these include having the chance to overpay, meaning you may be able to pay your mortgage off a lot quicker, as well as being able to carry the same mortgage and rates over to another property, if that ever becomes a need for you down the line.
Though a flexible mortgage sounds like it’s the most ideal situation to be in as a homeowner, they are usually found as tracker mortgages. As mentioned earlier on, tracker mortgages follow the Bank of England base rate, meaning one month your payments could change both positively and negatively, depending on the current level of interest rates. Some homeowners feel like this mortgage type is a little too unreliable.
Every homeowner will have some form of equity existing within their home. Equity is worked out by calculating the difference between what you still have left to pay on the mortgage and how much the property is currently worth. Further onto another previously mentioned topic of discussion, this can be used for home improvements, however there are still so many different options people can take.
Some will use the equity in their home to cover any necessary long-term care costs, to provide themselves with an income boost, to treat themselves to a much needed holiday, to pay off an interest-only mortgage or to have some spare cash laying around to do whatever they’d like with.
We often find that buy-to-let landlords will use equity release as a means of covering their deposit for buying any future property portfolio additions.
Another topic relating to the aforementioned topic of equity release, is utilising the existing equity in the property to pay off any unsecured debts that may have been building up in your name over time.
Though it sounds like a fairly straightforward concept, debt consolidation not only bases the amount on how much you’re owed and the value of the property, but also the current status of your credit score and history. This unfortunately means that if your score is bad (which is likely to be the case if you’re needing to consolidate debts), the lender may limit how much they are willing to let you borrow.
In addition to this, in order to pay off your previous mortgage and your debts, you will need to borrow a much higher amount than the mortgage amount you’re already paying off. This will likely cost more than you wanted it to. Though not an ideal situation, at least you can rest assured that if you find yourself in hot water, a mortgage broker in Bristol may be able to lend a hand.
If you have a particularly damaged credit rating, there are still options out there that you can take, though these tend to be quite challenging and require very specialist remortgage advice in Bristol to lend both their knowledge and care, before proceeding with your mortgage process. Even with our help, there’s never a guarantee you’ll be successful.
You should always look to gain mortgage advice prior to consolidating any debts and secure any debts against your home.
If you are on your way towards the end of your current mortgage term and are wondering what kind of remortgaging options you may have, please do get in touch with one of our fast and friendly mortgage advisors in Bristol.
A dedicated and experienced member of our mortgage advice team will be available to discuss your circumstances and future goals, helping you create a strong plan of the next steps you would like to take in your home owning and mortgage journey. When dealing with remortgages, we always aim to make the process simpler and quicker than it went the first time around.