Borrowing more money against your existing home can serve various purposes, such as funding home improvements, investment in another property, or retirement planning amongst other things.
You can potentially borrow more money against your existing home through a process called "remortgaging". Remortgaging involves replacing your current mortgage with a new one, often with a different lender or a new deal with your current lender, which allows you to release some of the equity in your home as cash.
Here's how it generally works:
Assessment: You'll need to assess whether you are eligible for remortgaging. Lenders will consider factors such as your credit score, income, the current value of your property, and the outstanding balance on your existing mortgage.
Equity release: If your property has appreciated in value since you first took out your mortgage, you might have built up equity. Equity is the difference between the current market value of your property and the outstanding balance of your existing mortgage. You can potentially borrow against this equity.
Lender approval: If your financial situation meets the lender's criteria, they may approve your application for a larger mortgage amount. The amount you can borrow will depend on your income, credit score, and the lender's policies.
Valuation: The lender will likely conduct a valuation of your property to determine its current market value. This valuation is used to calculate how much additional money you can borrow.
Terms and rates: The terms and interest rates for your new mortgage may differ from your existing mortgage. You should carefully review and compare these terms to ensure you're getting a favourable deal.
Legal process: There will be legal processes involved in remortgaging, including conveyancing and the transfer of funds. You may need to work with a solicitor or conveyancer during this stage.
Fees: Keep in mind that there could be fees associated with remortgaging, such as arrangement fees, valuation fees, legal fees, and early repayment charges from your existing lender if you're still within a fixed-term period.
Repayment: The new mortgage will have its own repayment terms. You'll need to make monthly payments according to these terms. This could involve a longer mortgage term or higher monthly payments, depending on the amount borrowed and the interest rate.
It's important to carefully consider whether remortgaging is the right choice for your financial situation. Make sure to compare different lenders' offers and consider seeking advice from a mortgage broker, such as Mortgage Scout, to ensure you make an informed decision.
Keep in mind that mortgage and financial regulations can change, so it's a good idea to consult with a professional who has up-to-date knowledge about the UK's lending practices and regulations.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.
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