Though increasingly out of fashion, New Year resolutions are still made especially when considering a big goal such as a new home or a re-mortgage. So, what are your options when it comes to property? In general, the market is divided into two main streams:
- Those who dream of a mortgage free life and would like to pay bigger sums in order to pay their mortgage early.
- Those who dream of a bigger house and are looking at borrowing more money to carry out home improvements or move to a bigger property.
Low interest rates experienced in the past few years offer an opportunity to pay off your mortgage quicker but also the opportunity to borrow more in some cases. As always, I am happy to support you where I can with whichever goal you choose so here is a summary of relevant advice: Paying off your mortgage early: Over paying on your mortgage will get you closer to that goal, whether it is through making a lump sum overpayment or paying a bit extra each month. According to sound financial and debt advise there are a few things to consider ensure you see a benefit:
- Make sure that you have enough savings in place to begin with aiming for 3-6 months’ income saved in an easily accessible account, to cover any emergencies
- Review your debts and prioritise clearing credit cards or personal loans as they are likely to have higher rates of interest than your mortgage.
- Before looking at paying off bigger chunks of your mortgage check that repaying will not cost you more than you actually save.
Carrying out home improvements: If you are looking to increase your living space through having an extension, building an extra bathroom and the likes you may want to borrow additional funding to cover the cost. If this is the case you have two main options open to you:
- Further Advance: Further advance is taking on more borrowing from your current mortgage lender. This is typically at a different rate to your main mortgage. This route can make sense if:
- you don’t want to re-mortgage or switch lender
- your lender’s further advance is competitive
- You can spread your payment over a long term and your interest rate should be lower than a personal loan. But always check the market to see if you can get a better deal before committing.
- Re-mortgage: You could also switch to another mortgage lender and increase the sum borrowed. But this is only suitable if you can save more than you might pay out in application fees to the new lender and early repayment charges for leaving your existing lender.
Remember you may be able to get a better deal elsewhere and lenders often offer the best deals to new customers, so shop around first. You’ll still have to go through the same strict affordability checks looking at income and outgoings when going to a new lender. Before you consider applying for a further advance or a re-mortgage, you should make sure that all of the followings apply:
- -The value of your home has increased beyond the mortgage amount you originally borrowed
- -You’ve got a good credit record
- -You feel comfortable with the additional monthly payments and you’ve worked out that you can afford them
Not sure what is the best option for you? Get in touch with me to discuss your personal circumstances and consider the options open to you.