Re-mortgage. how does it work?

[jofeb04]

Hiya,
We are thinking of remortaging our home as it will allow us to get rid of some of the other debts we have (credit card, loan etc).

However, we have no idea how it works.

Is it mortgaging the house for the amount it is worth now, and getting the difference back, or is it by mortgaging the house for the amount we origionally paid, but claim money back that we have paid over the six years we have been here?

Can anyone clarify the confusion?

Thanks,

Hi, basically say your house is worth £100,00 but your current mortgage is only for £50, then you can remortgage the difference iyswim. You could say remortgage so that your new current mortgage would be for example £75,000, still leaving you £25,000 equity. You should perhaps not mortgage to the full value of the house. May be better to leave some equity. Also, you want to work out what your payments will be as sometimes they can jump quite high!

The way we did it was to take out an extra mortgage on top. So we added a new mortgage of 5k, so that we have a second mortgage against the house. We had to do that because we had a 3-year fixed-rate deal that we couldn't get out of.

say your house is worth £100,000 and you have a £50,000 mortgage you can

1. remortgage to get a better rate .. so just move the 50K mortgage elsewhere

2. remortgage and get cashback .. so move your 50K elsewhere which offers a cashback inducement of up to say 6% of the value of the mortgage .. but this will tie you into them for a number of years (ie you'd have to pay a penalty to get out of it)

3. remortgage for up to the value of your house .. so new mortgage is 100K .. pay off 50K mortgage, have 50K to spend (not advisable in current climate)

I would recommend you go to a mortgage broker and let them do the work .. someone like charcolonline

be careful of fees charged by remortgagers (legal / survey etc) and tie-in clauses and penalties .. in fact look at the true cost of the mortgage over say 5 years

when I remortgaged last year I chose a deal with no fees (they paid legal and survey fees) and with no tie-in

We recently did this to allow us to get rid of some debt as well. It has put our mortgage payments up quite a bit every month but it has given us peace of mind tbh.

Thanks for the advice.

Not too sure if it is the best route, but we got into some debt, and would at least have the knowledge that those debts would be cleared.

Only problem is that we are with Northen Rock, and not too sure the best route tbh.

I feel so stupid having to even think of this route.

Well the debts wouldn't be cleared, you would just be paying them off over a longer period at a lower interest rate. They would still be there.

I think it's ok to do as a one-off, as long as your spending is under control NOW and you aren't thinking "Woohoo!" and start spending again. Re-mortgaging every five years is not a good long-term plan.

I know what you mean, I never thought we'd get in debt! I hated even having to ask the bank especially as it was dh who had accrued the debt without telling me (but that's another thread ). It's true the debts are still there, but I feel we are reducing them every month - dh was only paying the interest on credit cards every month We didnt have a big mortgage to start with though, that may influence your decision about whether it's the right thing to do.

Lol MP, I've learned the hardway to only spend what we have, and not what we can have on the credit card etc!

OUr mortgage will still be smallish (very small compared to others). It's less than 100,000, so and still will be with remortgaging.

Might be something to look at I suppose.

Thanks for all the advice.

jofeb04 my dp can give you free independant advice you can contact him here

THanks for the link Lily,
Will be in contact over the next couple of days.

No probs hope he can help and you aren't comitted to anything but worth getting advice