If
your home is worth considerably more than when you
took out your mortgage, it may seem sensible to increase
your loan to pay off other debts, fund improvements
or even treat yourself to something you’ve always
wanted.
But you could be making a big mistake.
Even if you remortgage to a lower rate of interest,
you may not be making best use of your money. So ask
yourself:
Is it really worth it?
If you want the money to clear other debts, take a
few minutes to compare the cost of the different types
of borrowing.
If you owe £5,000 on a credit card with an interest
rate of 16 per cent, for example, it might seem like
a no-brainer to add it to your mortgage, where you
could pay around 6 per cent.
In fact, over a standard mortgage
term of 25 years, it would
cost £9,660 to clear that £5,000 because
of all the interest you would rack up.
If, on the other hand, you stuck with the 16 per cent
card and paid it off over five years, it would cost
just under £7,300 because you would be borrowing
over a far shorter period.
And if you moved the debt to a low-cost, unsecured
personal loan, it would be cheaper still. Borrowing
at 7 per cent over three years, the total cost would
fall to under £5,560.
Better still, switch the £5,000 to a zero per
cent interest credit card and clear it within the
offer period, and you would pay nothing extra at all
apart from the transfer fee.
What value home improvements?
If you want the money to improve your property, ask
a couple of estate agents how much your proposed changes
will increase its value.
You may change your mind about borrowing £10,000
to install a new kitchen, say, if it will add only
a couple of grand.
Spend in haste...
If you’re planning to splash the cash on a dream
holiday, car or other ephemeral treats, think doubly
hard about whether it’s wise.
How will you feel when you’re still repaying
the debt years after the trip is forgotten or the
car has been scrapped?
If you’re determined to go ahead, consider a
personal
loan instead.
There may be little difference in the interest rate,
but because the term will be much shorter, you’ll
end up paying considerably less.
If
you want to get your best remortgage
quote quickly and easily we offer a great new
service. We can put you in contact with a professional mortgage
adviser. It's free and completely confidential. Simply fill out
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