Should You Consider Re-Mortgaging Your Home?

Should You Consider Remortgaging Your HomeWith mortgage rates dropping and house prices rising, many people are looking to take advantage by re-mortgaging their homes. There has been a recent re-mortgaging increase of 9% on the monthly average in the UK, highlighting the fact that homeowners are really seeing the value in the current market. But is it the right decision for you?

A re-mortgage allows you to essentially stop paying on your old mortgage before it is paid off. Instead, you can then take the proceeds from your new mortgage to cover that old one.

While that may seem desperate to some homeowners, it can save you from having to foreclose on your home, free up some money for another major purchase or help you get a better deal on your mortgage. It also gives you more time to pay for your home, which means you can just relax a little and not have to worry so much about the demanding payments of that first mortgage.

There are definitely some benefits to having some extra cash on hand. The re-mortgage gives you upfront cash to do with as you please. Most people use that as a way to put themselves in a better situation financially. They may pay off large debts and make sure they are able to meet their financial responsibilities for years to come. This can be the perfect opportunity to pay off something that you have been paying for years or to finish off a debt that you were close to paying off.

You can also use it to give your home more value. Many homeowners take the new mortgage money and repair or upgrade their home. It is the perfect time for them to get that new kitchen they wanted or to refurbish the bathroom. This not only makes the house a better place to live, but it also adds real value to the home that can make it easier to resell it later.

Many people decide to take out a second mortgage on their home not because they can no longer afford to pay their original mortgage but because paying that mortgage puts them in a tight spot financially. It may keep them from making improvements or paying debts that they want to take care of. Taking out the second mortgage gives them some temporary freedom. Now it may seem disingenuous to take out more money to pay for debts already accrued, as it can seem to continue a cycle of debt. But it can be a smart move if the money is leveraged properly.

For instance, the debts paid off by that mortgage money could have higher interest rates than the mortgage does. That would mean that the homeowner is actually saving money over the long run. Taking out that mortgage may also free up some funds for major life changes. Perhaps a new child is on the way or one of your children is getting ready to go to university. The extra cash allows the family to pay for those changes without putting themselves behind on their mortgage payments.

If you feel constrained by your current mortgage and you can definitely improve your situation by a cash influx, then re-mortgaging your home may be the right decision for you.

 

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