Homeowners who need a cash injection for home improvements, holidays of a lifetime, or anything else have a couple of different options on the table. Most will choose to either remortgage their home or take out a second charge mortgage. There are pros and cons to each of those solutions, and it is vital that you understand each of them correctly to ensure you can make the right decision for your family. Today, we’re going to offer an insight in the hope of helping you to get things right. Who knows? You could even use the money to clear your debts and give your family a fresh financial start.
What is a remortgage and how does it work?
Let’s presume you need £50,000 to cover the cost of building an extension on your home. I many instances, you can visit your bank or another establishment and apply for a remortgage deal. That is like starting your mortgage contract all over again with new terms. If you have equity in your home; you can free-up the cash and use the money to pay for your extension.
The only downsides are that the mortgage will start over for a second time, and so you will have to make monthly payments for much longer than you otherwise would have done. Still, the property remains in your name, and you’ll have access to all that capital you have tied up in the place.
What is a second charge loan and how does it work?
Let’s presume you’re in that same situation again, and you still need £50,000 to pay for home extensions or improvements. You might decide that remortgaging the house doesn’t make sense because you have a low baseline mortgage at the moment, and you would lose your fantastic rates.
In that situation; you might consider getting a second charge loan because they sit on top of your current mortgage deal. You use the equity in your property as collateral, but you don’t remove the pre-existing mortgage. So, you keep your excellent interest rates, but you can still gain access to that capital.
Which is right for me?
There is no way of telling whether a remortgage deal or a second charge loan is the best choice for you without considering some factors. Answering these questions will help you to make the right choice.
How much equity do you have in your home?
Are you still paying the first mortgage?
Do you have excellent interest rates you want to keep?
Whatever you decide to do during the next few months, we hope this article has helped to point you in the right direction and explain the differences between remortgage and second charge mortgages. If you’re still struggling to work out which is right for you; it might make sense to employ the services of a secured loan broker and ask them to make a suggestion. Do not make the mistake of rushing into either of those lending options because you’re going to be stuck with the choice for many years if you get things wrong.