Raise Capital And Keep Existing Mortgage
When it comes to accessing funds for various purposes, homeowners often have a valuable asset at their disposal: home equity. Home equity is the difference between the market value of your property and the outstanding balance on your mortgage. This equity can be a powerful financial tool, allowing you to raise capital without selling your home or disrupting your existing mortgage. This article will explore the concept of raising capital while keeping your existing mortgage, providing you with a comprehensive guide to effectively leveraging your home equity.
Well, given the increase in mortgage rates, borrowers are more inclined to want to stick to their lower fixed rates and avoid remortgaging to a more expensive deal.
People who want to get some cash by remortgaging their home for reasons such as;
- Renovating,
- Consolidating debts,
- Raising funds to purchase another property, etc.
As part of our guide on “Raise Capital And Keep Existing Mortgage”, we need to cover all relevant information that may be important to have an overall understanding.
Understanding Home Equity
For homeowners, understanding home equity is crucial for making informed financial decisions and leveraging the value of their property. Home equity represents the portion of your home that you truly own and can serve as a valuable asset, allowing you to Raise Capital and Keep Existing Mortgage. It is essentially the difference between your home’s current market value and the outstanding balance on your mortgage. As you pay down your mortgage or as your home’s value appreciates, your home equity increases, which can offer various financial benefits, including the ability to Raise Capital and Keep Existing Mortgage.
We are here to explore the concept of home equity, how it is calculated, and its significance in building wealth and achieving financial goals. This knowledge empowers homeowners to make strategic decisions, such as tapping into their equity for home improvements, debt consolidation, or funding major life events like education or retirement. It also plays a pivotal role in the overall net worth of an individual or family, making it a key consideration in long-term financial planning.
What is Home Equity?
Home equity is a crucial financial asset for homeowners, and it can be leveraged in various ways. One common strategy is to raise capital while keeping your existing mortgage intact. This approach can be particularly advantageous when you have a substantial amount of home equity built up. By accessing this equity, you can secure funds for various purposes, such as home improvements, debt consolidation, education expenses, or even investment opportunities, without changing your existing mortgage.
The process of raising capital without refinancing your mortgage involves taking out a home equity loan or opening a home equity line of credit. Home equity loans provide a lump sum of money with a fixed interest rate, while a HELOC offers a revolving credit line that you can draw from as needed. Both options allow you to tap into your home’s equity without affecting your current mortgage terms.
However, it’s essential to consider the implications of this strategy carefully. While raising capital through home equity can be a valuable financial tool, it also involves risks. If you cannot meet the repayment terms, you could potentially risk losing your home. Therefore, it’s crucial to create a well-thought-out financial plan and assess your ability to manage the additional debt responsibly. Furthermore, the interest rates and terms of these loans can vary, so it’s advisable to shop around and compare offers from different lenders to secure the best terms for your specific needs, ensuring that you can effectively “Raise Capital and Keep Existing Mortgage.”
Understanding the concept of “Raise Capital And Keep Existing Mortgage” requires a grasp of home equity and how it can be harnessed to access funds for various financial goals while retaining your existing mortgage. This approach can offer flexibility and financial opportunities, but it should be undertaken with careful planning and consideration of potential risks.
Calculating Home Equity
To “raise capital and keep existing mortgage”, you must understand how the calculation of home equity works.
To calculate your home equity, follow these steps:
- Determine the market value of your property: The market value is the estimated worth of your home based on various factors, such as its location, condition, and recent comparable sales in your area. You can consult a real estate agent or use online valuation tools to get an estimate.
- Calculate the outstanding balance on your mortgage: This is the remaining amount you owe to your mortgage lender. It includes the principal balance and any accrued interest.
- Subtract the outstanding mortgage balance from the market value: Subtracting the outstanding mortgage balance from the market value will give you your home equity. For example, if your home is valued at £400,000 and your outstanding mortgage balance is £250,000, your home equity would be £150,000 (£400,000 – £250,000).
Do you want to “raise capital and keep existing mortgage?” They may have another option: leave their mortgage to avoid their lender’s hefty repayment charges.
Many customers are now considering second-charge mortgages, the second mortgage that sits behind their primary mortgage and is taken out against the property’s equity. These loans used to be known as secured loans a few years ago and are often not seen in a good light, but now they are as highly regulated as first/main mortgages, so they have become a more mainstream option.
Keeping the rate on the primary mortgage unchanged could save a substantial amount of money due to several recent rate increases.
That being said, there are some critical considerations. First, rates are often higher as the second charge lender sits behind the first charge lender when using the property as a security. As these loans are a mortgage, they are secured against your property, and therefore, you could lose your home if you do not keep up with the payments.
As the United Kingdom (UK) households struggle with the high costs of living and financial challenges, some homeowners are looking at debt consolidation and obtaining second-charge mortgages to help reduce their outgoings. However, it is essential to remember that spreading the debt over an extended period could cost more in the long term. This is especially relevant for short-term loans like car loans. This is a fine example of why you would want to raise capital and keep an existing mortgage.
Moving a 5-year fixed loan to a 20-year mortgage is never a good idea. It is nearly always going to cost more. However, expensive credit card debt currently paid with minimum payments could cost less in the long term and likely reduce monthly outgoings.
Are you looking to raise capital but don’t want to lose your current mortgage?
We at Connect Mortgages offer second-charge mortgages to help raise capital and keep existing mortgages. This is especially important for the upcoming year.
A second-charge mortgage is a viable solution that allows homeowners to raise funds tied up in the value of their property over similar terms without removing their favourable first charge and, importantly, avoids the early repayment charge that may be due.
When your current fixed rate ends, we can look to bring your second-charge mortgage back in with your new remortgage, depending on affordability calculations.
A second mortgage is often more cost-effective than remortgaging to raise additional capital. However, it is essential to note that each case is different, and a mortgage broker should always consider several options when helping a customer raise more capital. This includes a further advance from their current lender, remortgaging and second-charge mortgages. = Raise Capital And Keep Existing Mortgage
If you have a complex income structure, remortgaging with your current lender may be more problematic because lenders are becoming stricter with their lending criteria and affordability requirements due to the cost-of-living crisis. In this case, a second-charge mortgage could be a solution if you need to borrow money. = Raise Capital And Keep Existing Mortgage 
Second-charge mortgages offer more when it comes to affordability calculations, so when a remortgage with additional funds is not affordable, a second mortgage is an option. = Raise Capital And Keep Existing Mortgage
As a responsible mortgage brokerage and advocate of `treating customers fairly`, all necessary due diligence will be undertaken. Your situation will be thoroughly assessed to ascertain the right decision and advice to reflect your circumstances, and a recommendation will be made when all options have been considered. Call us today to see how we can help you raise capital and keep your existing mortgage.
