Remortgage services can be either a great way of saving money, or a huge waste of it. What it is in your case will depend on what you need and which service you choose. We are going to look at four of the main types of remortgage services and briefly analyze what their benefits and drawbacks are.
However, let us remind ourselves of what a remortgage actually is. A remortgage is essentially a mortgage taken on by a borrower to replace another mortgage secured on the same property. Outside the UK it is generally called refinancing. The reasons to remortgage, or refinance, are various. However, the goal of a smart remortgage is always to reap some kind of financial benefit from the change.
Remortgage Service Type 1. The Cash out Remortgage.
Remortgaging is often carried out by people that need extra cash. This service is ideal for people who have substantial equity on their homes. They can find a new lender that is willing to remortgage their house, and with the cash they receive they pay the old mortgage and use the balance for whatever they want or need. Of course this can only be done if you have equity on your home, i.e. owe less on your mortgage than the market value of your home.
Remortgage Service Type 2. Smart refinancing.
A remortgage can also be a smart way of reducing the cost of your loan. If the interest rates have dropped since you bought your home you could apply for a remortgage that provides lower interest rates. It can also be useful to refinance a mortgage if you can change from a high risk ARM (adjusted rate mortgage) to a safer fixed rate mortgage. The important thing to do in these cases is to calculate carefully the total cost of refinancing. Although you can save a lot of money, and find peace of mind with a remortgage there are a number of costs related to remortgaging that must be taken into account.
Remortgage Service Type 3. Retirement Cash
Often homeowners that reach retirement age find their monthly income has been seriously reduced since they stopped working. However they realize they are sitting (literally) on a huge amount of equity locked inside their homes. In some cases the home is nearly paid for, which provides the homeowners with plenty of equity to play with. They can remortgage their home and use the cash to maintain, or even improve their quality of life. The remortgage can be paid by the proceedings of the sale of the home, or a life insurance, once they die. This latter option is ideal for homeowners that also want to leave the family home to their children.
Remortgage Service Type 4. Consolidating
A popular type of remortgaging is the purchasing of a new mortgage to consolidate various loans into one larger loan with a single monthly payment. This a great option for people that have multiple loans with high interest, and are struggling to keep up with their payments. Loan delinquency is expensive and destroys your credit rating, which will make it harder to get a prime loan in the future, and could affect your chances of applying for a job, or even renting a house.
All of this can be avoided if you remortgage your home and use your equity to absorb your other loans into one big loan, with lower interest rates, and more affordable payments.
However, remember that remortgaging your home is a serious and a potentially hazardous financial decision. You could be putting your home at risk by refinancing it. There are also many costs associated with remortgaging that could jeopardize any potential savings. You could also be loading yourself with extra debt you do not need, or cannot afford to pay back. As always, it is important to talk to a reputable mortgage expert, or financial advisor that can help you avoid the dangers, and enjoy the benefits of remortgaging your home.