If you're having trouble paying your bills because of debt and you own a home, you may have a good way to get rid of that debt. A remortgage could be just what you need to find a way out and lower your monthly bills at the same time. Here's how you can get a remortgage to help you pay off your debts.
Before you think about remortgaging, you should think about whether or not you plan to live there for at least seven more years. Just like your first mortgage, remortgaging has fees and costs that can take up to three years to pay off.
Look at your credit score.
You should know that the best time to think about a remortgage is before your debts start to hurt your credit score. Every year, you can get a free credit report from each of the three biggest credit bureaus. Once you have it, you can look it over and make sure that everything it says is true and current. Before you apply for a remortgage, make sure that all of the wrong information on your credit report has been fixed. This is because your credit score will have a big impact on your new interest rate.
Keep an eye on interest rates.
This will help you figure out when you should remortgage. You want to wait until you can get an interest rate that is at least 1% less than what you have now. If it's close, but you think the market might not go any lower, you might be able to buy points to get an even lower rate.
If you can, change your mortgage to a shorter term.
Even if you're doing this to consolidate your debt, you should try to keep the length of the remortgage as short as possible. The shorter the time period, the less you will have to pay in the long run. This will cut down on your total debt over time and help you pay off your mortgage faster. In fact, if you can, try to make it about 5 years shorter than how long your current mortgage has left. This will help you save on interest, which could save you tens of thousands of dollars.
Get Your Hands On Your Equity
If you've lived in your house for a while, you've probably built up some equity. When you refinance, you can get this. Even though you could get much more, you shouldn't remortgage for more than 80% of your home's value or you'll have to pay for Private Mortgage Insurance (PMI).
With your equity, you can do whatever you want. This is the money you use to pay all your bills at once. It is a good alternative to a personal loan because it has much lower interest rates. It also gives you a long time to pay it back and has a much lower interest rate than a credit card.
Put some of your home's value back into it.
Also, it's a good idea to put some of your home's equity back into it by remodelling or adding on. This adds even more to the value of your home and is also tax deductible.
Get several quotes before you agree to a remortgage deal. Then carefully look at them and pick the best one. Make sure you understand all of the terms, and don't get a remortgage that has penalties for paying it off early.
