Remortgage: Eke out that hidden capital from your home
You may have put in all your life savings to buy the home of
your dreams. But the fact remains that you will not be a true
homeowner until you have paid all the dues attached to your
home. There is always a danger of repossession looming over your
head and moreover you cannot even conceive the thought of making
some other substantial savings until you are done with your
mortgage payments.
What if you could somehow manage to reduce the monthly
installments on your mortgage, thus giving you some extra cash
to add to your monthly savings? Well, you don't really need a
magic wand for this. All this can be done via the process of
remortgaging.
Remortgaging is a process, which involves replacing your current
mortgage deal with a new one in favour of a lower rate of
interest. Basically, you avail a low rate mortgage from a new
lender and use it to pay back the outstanding mortgage of your
old lender. Now, you will be able to pay lower monthly
installments and hence add up some cash to your savings kitty.
Now, the obvious question is why will your new lender offer you
an interest rate lower than your current one? The reasons are
manifold. May be the market economy favours such a move, or your
home may have built in equity over the years or better still
your financial circumstances may have improved assuring the
lender of your credibility.
In all probability, negotiations may prompt your current lender
to offer you a lower rate of interest. After all he wouldn't
want to lose your business.
Besides, helping you save money, a remortgage can also help you
raise some good cash. If your home has built significant equity
from the time you availed your mortgage, then you can draw out a
loan against this new appraised value of your home. You can use
this money to pay off the outstanding mortgage and pocket the
remaining portion.
The additional funds that you generate out of a remortgage may
be used in a number of ways. You may invest it in some
profitable venture, or finance a big shopping spree or even pay
off your debts.
Although, a remortgage seems like a very attractive proposition,
you must take care to find out about redemption and other
penalties that you may incur. Also, don't forget to read the
finer details of your contract and always watch out for those
hidden charges.