Thursday, 23 July 2009

Remortgaging and debt problems

posted by debts.org at 02:35

One way of releasing equity from your home is to remortgage the property, or by taking out a separate loan against your home with another lender.
Be very cautious.

Weigh up the pros and cons of remortgaging your houseRemortgaging can increase your debt if not handled properly.

You must weigh up the pros and cons and never rush in to a remortgage deal unless you understand the repercussions fully.


By using your house as security for a loan, you will be able to pay off your debts, providing you have sufficient equity.

However, by borrowing money against your house you are putting your home at risk, and if you can´t make the repayments each month, the mortgage interest rates could rise and you could be at risk of house repossession.

A secured loan and repossession

A secured loan against your home can last as long as your original mortgage, so you could end up paying much more overall.

Your monthly payments may appear lower, but you have spread your debt over a much longer period of time.

If you try to borrow money this way, try to keep the term of the loan as short as possible. If you increase the term of your current mortgage, try to overpay so that the amount reduces quicker


Switching your mortgage

If you switch your mortgage to a different lender altogether, you may be able to borrow more money to pay off your debts without increasing your monthly payments.

New customers often receive better deals and offers. People who are not even in debt, change mortgage lenders regularly to make the most from their money.

However, if you are thinking of remortgaging your home to relieve your debt problems, always remember:


• You may have to take into account redemption penalties.

These are charges made by the lender for cancelling/paying off your mortgage early. This could offset the money you will gain by refinancing.

Legal fees of up to £500 will also be charged. The new lender will probably also charge an arrangement fee for setting up the mortgage plus charge for a survey.

Find out the exact cost of your remortgage before agreeing to anything.


• Some lenders may agree to pay these fees, which could still mean a substantial saving for you, and could help with your debt problems.

The larger your current mortgage the more you are likely to save, and these savings could help relieve your debt problems.


• Before you switch your mortgage, contact your current lender and tell him you plan to shop around for another deal. They may well offer you a better deal to keep your custom.


• Always remember, that if you use a home loan to pay off your debts, you still have one large debt to pay, and it has been borrowed against your home.

Don´t look at a remortgage as an easy way out.If you feel your debts have spiralled out of control, you should seek professional advice from a specialist debt company who will give you free guidance.

Here at debts.org, we can arrange debt management plans (DMPs), Individual Voluntary Arrangements (IVAs) and bankruptcy.

We will even talk to your debtors to save you time and hassle.

Our friendly and professional team of staff are here to help you, and we are only a phone call away.

Alternatively, contact us by filling in the online form.