You may have put in all your life savings to buy the home of your dreams. But the fact remains that you will not be a true homeowner until you have paid all the dues attached to your home. There is always a danger of repossession looming over your head and moreover you cannot even conceive the thought of making some other substantial savings until you are done with your mortgage payments.
What if you could somehow manage to reduce the monthly installments on your mortgage, thus giving you some extra cash to add to your monthly savings? Well, you don't really need a magic wand for this. All this can be done via the process of remortgaging.
Remortgaging is a process, which involves replacing your current mortgage deal with a new one in favour of a lower rate of interest. Basically, you avail a low rate mortgage from a new lender and use it to pay back the outstanding mortgage of your old lender. Now, you will be able to pay lower monthly installments and hence add up some cash to your savings kitty.
Now, the obvious question is why will your new lender offer you an interest rate lower than your current one? The reasons are manifold. May be the market economy favours such a move, or your home may have built in equity over the years or better still your financial circumstances may have improved assuring the lender of your credibility.
In all probability, negotiations may prompt your current lender to offer you a lower rate of interest. After all he wouldn't want to lose your business.
Besides, helping you save money, a remortgage can also help you raise some good cash. If your home has built significant equity from the time you availed your mortgage, then you can draw out a loan against this new appraised value of your home. You can use this money to pay off the outstanding mortgage and pocket the remaining portion.
The additional funds that you generate out of a remortgage may be used in a number of ways. You may invest it in some profitable venture, or finance a big shopping spree or even pay off your debts.
Although, a remortgage seems like a very attractive proposition, you must take care to find out about redemption and other penalties that you may incur. Also, don't forget to read the finer details of your contract and always watch out for those hidden charges.