From what i gather about remortgaging, you release equity on your house and you are increasing the value of your original mortgage debt. It could be to pay off credit card debts or invest into a buy to let. Well my question is: is it possible to lower the initial mortgage debt simply by remortgaging the appreciation of the house. For example, if i bought a place for 170k with a 30k deposit and since then it has risen to lets say 240k, if i remortgage with another mortgage provider can i use the capital appreciation of 70k to lower the mortgage even further? Hence, my original mortgage loan of 140k is now reduced to 70k. Is this possible or am i just dreaming?? The other thing is if the above was possible would it be best to remortgage the capital appreciation to lower the original mortgage debt or remortgage the value of the house to invest into a buy to let??
Can You Remortgage Your House To Lower The Original Mortgage Debt?
25
Sep
Adam B
September 25, 2009 at 3:26 pm
The amount you owe will remain the same. It is just a lower interest rate may be obtained.
curious
September 25, 2009 at 3:30 pm
You have the theory of ‘Mortgaging’ all twisted!
I had to read the question a few times to check, but NO you CAN’T remortgage to ‘REDUCE’ the total amount you have borrowed..
Your initial debt of £30k, in this example, would RISE to a total debt of £100k (£30k plus £70k)
People pay off credit cards with a remortgage because the interest rates are lower.
Releasing capital appreciation by way of remortgaging can be a good way to raise funds to use as a deposit for a Buy to Let or extension etc, but seek advice rom an expert if you are going down that route, especially at this topsy turvy financial period.
Tired Old Man
September 25, 2009 at 3:32 pm
You have nice dreams. The capital appreciation may get you a lower interest rate, but you are dreaming if you think capital appreciation will reduce the original mortgage. If you sell you may have a capital gain. Then you have taxes, moving expense and you may not get into as good a place. Reducing the interest would be a substantial gain to you. Then try and reduce the principal by making one more payment a year. 7 years is the thing. Not a sellers market right now. Get the lowest interest you can, but watch very closely not to pay points. It is trickier than you think.
Wylie Coyote
September 25, 2009 at 4:03 pm
But you would still have debt only larger than before because you would have borrowed more money to liquidate the capital appreciation. The only way to lower a morgage debt is to pay it off by make extra payments when you have spare cash.
Huge
September 25, 2009 at 4:16 pm
I personally would not re-morgage.I would try to get it paid off.
We managed to pay ours off & have saved thousands of pounds in interest.
Ollie
September 25, 2009 at 5:15 pm
i dont know
xxxkcxxx
September 25, 2009 at 5:34 pm
You math is wrong. You can’t get something for nothing. You must always repay the money you borrowed plus interest. Whatever has happened to the value of the house while you have owned it has no bearing on what you owe.
Here’s an example. If half the house burned down and insurance didn’t cover rebuilding it and you lived in what was left the mortgage wouldn’t decrease. You’d sill owe what you borrowed plus accumulating interest.
?
September 25, 2009 at 6:16 pm
sure you can
♥ Sweet Judy♥
September 25, 2009 at 6:54 pm
No. The only way you could get the 70,000 would be to borrow it and that would place another $70,000 mortgage on your home to replace the $70,000 you would pay off.
Don’t confuse equity with cash. To turn equity into cash you must either sell it or borrow against it.
SuperCac
September 25, 2009 at 7:08 pm
the mony you owe will remain the same so it is not really worth the trouble.
buying to let is very dangerous in todays economic climate so forget that idea
confucious says
September 25, 2009 at 7:49 pm
NO. The 70k you talk about is equity. You can barrow against it but that will give you two 70k loans instead of one 140k loan. Besides starting a loan over will mean paying even more intrest as in the initial years of a loan you pay almost all intrest. Not good to start it over
the champ is here
September 25, 2009 at 8:23 pm
The answer to your question ‘is it possible to lower the initial mortgage debt simply by remortgaging the appreciation of the house’ is no. The way to lower the initial debt is to pay it off.
However, a lower monthly payment may be achieved in 2 ways.
a) IF interest rates today are lower than what you are paying, you can re-finance and lower your payment.
b) IF you have a tidy amount of cash on hand you can pre-pay your mortgage and THEN re-fi to lower your monthly payment.
Keep in mind, it costs money to borrow money so everytime you re-finance a mortgage you incur that expense of borrowing ( origination fees and closing costs), usually around 3% of whatever amount you are borrowing. AND regardless if you roll those costs into the new loan, they are STILL an expense.
broccoli brain
September 25, 2009 at 9:10 pm
You can Try:
http://buy-new-apartement.blogspot.com/
http://buy-new-home.blogspot.com/
reza o
September 25, 2009 at 9:35 pm
I got my remortgage through these guys http://www.loan-link.co.uk/
They gave me some really good advice for free even before i decided to go with them. They don’t just do remortgages for bad credit history by the way before anyone think i’m a bit shady.
Sherlock
September 25, 2009 at 9:46 pm
Your initial debt was £140,000.
The value of the house now, you think it’s £240,000, is only notional. It’s only worth that if you can sell it at that price.
Pie in the sky is atractive.. But it doesn’t pay off the mortgage