There are lots of reasons as to why someone may look to remortgage, which you will find plenty of information about both on our website and across the internet, if you’re doing your own research.
From a remortgage to release equity, to a remortgage for home improvements, there is an array of options for homeowners. One that perhaps isn’t discussed enough though, is the option to remortgage to extend your term.
Yes, that’s right, you may have the option to remortgage and extend the term!
Your term is the length of time you are contractually obligated to pay back your mortgage. Popular choices tend to be 25-30 years, which is of course a long time to be paying back such a large amount.
Once you are part way in, you may feel like it’s a little challenging to maintain your payments, perhaps other bills have gone up. By remortgaging to extend your term, you spread the mortgage you have across a longer duration, which in turn can lower your monthly mortgage payments.
This in turn frees up more disposable income for you on a monthly basis. Alas, it’s not all positives, as the downside will be that you’ll be spreading interest over that length too.
That means that whilst it will be cheaper per month, you’ll end up paying more back overall, perhaps even into your retirement.
Yes, it may still be possible for you to extend your term if you’re looking to borrow additional funds or remortgage to release equity.
In reality, you can likely do this with any remortgage path you’re looking to take, with popular choices also being during a remortgage for home improvements and a debt consolidation remortgage.
Once again though, whilst you will be extending your term over a longer period to lower monthly mortgage repayments, you’ll be paying more interest overall.
You should think carefully before securing other debts against your home. By adding your unsecured debts to your mortgage, which is secured on your home, you are potentially putting your home at risk if you cannot make the required repayments.
Although the total monthly cost of servicing your debt may have reduced, the total cost of repayment may still have risen as the term of your mortgage is longer than it may have taken to repay the debts originally.
Though it varies between the different mortgage lenders, there are a variety of factors that may limit your ability to remortgage and extend your term. These include, but are not limited to, your age, the type of mortgage you have and if you have any mortgage payment debts.
It’s not the end of the road if this doesn’t work for you, as there may still be options for you out there to help lower your monthly payments. It’s the job of your dedicated mortgage advisor to review your case, and look for the most suitable outcome to help you both personally and financially.
This is a little tricky, as not many mortgage lenders will allow you to extend the term of your interest-only mortgage. Some may not see the harm in allowing you to do so, however, you will still owe the lump-sum of interest at the end of the term and they may not want you to delay that any further.
Furthermore, most residential properties will be on some form of repayment mortgage, as a residential interest-only is much less common nowadays. Instead, you are much more likely to see interest-only attached to a buy to let property.
This in turn comes with it’s own challenges, as not only do you still have the same issue of paying back the lump-sum, but mortgage lenders may not allow you to extend your term whilst it is let (has a tenant living inside of it).
In either case, your best option may be to look at remortgaging your property to replace your interest-only mortgage with a repayment mortgage, allowing you to continue by paying back a combination of both capital and interest.
To better understand your options in these complex circumstances, we would highly recommend speaking to an expert member of our remortgage advice team, prior to doing this.
You may also wish to reduce your term instead, which again can apply to almost all mortgage situations. In this circumstance, contrary to extending your term, you would be paying back less overall, but likely have much bigger monthly mortgage payments to make.
Rather than remortgaging to extend your term, there may be other options for you to take, if you are looking to save some money per month on your outgoings. Of course we have already looked at remortgaging, but have you considered downsizing?
Downsizing is where you sell your current home, and move into a smaller property. Typically speaking, a smaller home may cost less, meaning you’ll not need as big of a mortgage, and in turn will have lower monthly mortgage repayments.
In addition to this, if you are over the age of 55 and have a property that is worth at least £70,000, equity release may be an appropriate next step for you to take. You could release funds tax-free from your home, in either a lump-sum or occasional payments, via a lifetime mortgage.
That being said, equity release may still not be the right option yet. There are also options for over 50’s, such as “RIOs” and “TIOs”, retirement interest-only mortgages and term interest-only mortgages.
Much the same as it would be for equity release, with a RIO or TIO, your loan is only repaid when you die or move into long-term care and your home is sold.
A qualified, open & honest later life mortgage advisor will be able to look through all of the potential paths you could take as a later life homeowner, and advise on the most suitable route to take, based on what you are looking to achieve, and your future plans.
To understand the features and risks of equity release and lifetime mortgages, ask for a personalised illustration.
A lifetime mortgage may impact the value of your estate and it could affect your entitlement to current and future means tested benefits. The loan plus accrued interest will repayable upon death or moving into long term care.