Crucial Matters You Must Be Aware of Before Considering a Remortgage
In your research, you are going to figure out pretty quickly that remortgaging is a heated issue. Some people argue that it’s a great idea. And others will say it’s the worst decision you could make. The truth is, it really depends on your situation. In this short article, you’ll learn the basics of how to tell if a remortgage is right for you.
Why & When a Remortgage Can Be a Smart Decision
The goal of a remortgage is to save you money. You hunt down a lender willing to offer you better interest rates and terms. Then, you basically pay off your first mortgage with the loan from your remortgage. Now, you are free of that old contract and enjoying the new terms.
If you do this at the right time and in the right way, you can stand to save a LOT of money. But the right time depends on a few factors. Here are some of the general guidelines for making a remortgage work for you:
- The sooner you remortgage, the more you can save.
- Your financial situation has improved since your first mortgage, qualifying you for better rates and terms.
- You want to pay off your mortgage sooner to pay less in interest.
- You want to make home improvements or invest in new property.
In short, a remortgage is a great idea for anyone who is currently financially stable and looking to further improve their situation. If you’re treating it like an investment opportunity or savings opportunity and you’re on the right track.
Before you make a final decision, you should get more information and real concrete advice from legal experts that really know the ropes. Experts can closely analyze your current financial situation and help you decide whether or not a remortgage is the right choice for you.
The Risks & Potential Drawbacks of Getting a Remortgage
There are certain situations when getting a remortgage not only doesn’t help but could actually hurt you. Here are a few of those situations:
- You have already paid off most of your mortgage. Remortgaging when you’ve only got a small amount left ($50,000 or less) doesn’t make financial sense. Because you have to pay fees for switching and these fees can quickly outweigh the amount you save by switching.
- Your current mortgage has a high early repayment fee. This is a tricky term they often sneak into your contract that punishes you for paying your mortgage off earlier than the term of your loan. If that fee is higher than the amount you save in switching, it’s not worth a remortgage.
- Your property value has decreased. If your property value dropped since the first loan, a new mortgage would probably give you even higher interest rates than you have now.
Basically, if you’re using a remortgage to get yourself out of a tough spot, it’s probably not a good idea. It’s not a good long term solution to an emergency. It is a good way to make a good financial situation a whole lot better, though.
Refinancing your home with a mortgage can be a smart financial decision that helps you lock down better terms and interest rates than you had on your first mortgage. But if you aren’t careful, that savvy finance trick could turn into your greatest financial blunder. So make sure you do your research, listen to the advice experts, and make sure you hunt down the best remortgage you can find.
*Guest Post: John Miller.