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Here are some of the other types of mortgage available:
Remortgages
You don't have to move home to move your mortgage. Many homeowners move their mortgage to a different lender to save money, or switch to a different mortgage with their current lender.
Why remortgage?
You may want to remortgage to:
- Improve your home. Taking out a larger mortgage allows you to improve your existing home, without moving to a new property.
- Save money. If you're paying your lender's standard variable rate (SVR), your existing lender - or another lender - may offer better rates if you move to a different mortgage.
- Raise money. If you want to improve your home, or pay off other borrowings, you may be able to increase your mortgage rather than taking out a separate loan.
- Consolidate your debts. Remortgaging can allow you to release some of the money tied up in your house, to pay off other debts, which may be at higher rates of interest than your mortgage.
You may want to think twice about remortgaging if:
- You would have to pay penalties if you remortgage.
- You have a small mortgage of £25,000 or less. This is because you may not be able to save much, or it may be under the mortgage lender's minimum remortgage amount.
- Your employment status has changed recently. This is because you may need to send in your last six months' wage slips, or some mortgage companies look more favourably on people that have been employed by the same company for a while.
Buy-to-let mortgages
Buy-to-let mortgages are available if you want to buy a house and plan to rent it out, rather than living in it yourself. Some investors have taken these out as alternatives to stock market investments, although there are still a number of risks if you take out a buy-to-let mortgage.
What are the risks?
You could run into difficulties with a buy-to-let scheme if:
- You cannot find tenants. You will still have to pay the mortgage (and that could mean you're paying two mortgages).
- The rent may not cover the mortgage payments.
- The tenants disappear without paying the rent.
- The property falls in value.
You should speak to an Independent Financial Adviser for advice on buy-to-let mortgages, as it's a complex subject. You'll find details of your local IFA in Yellow Pages www.yell.co.uk or visit www.unbiased.co.uk
Mortgages to release the equity in your home
There's a lot of cash tied up in your home. You can release the 'equity' (or cash) by remortgaging and taking out a larger loan - that's as long as you have:
- Enough income to qualify for the larger mortgage.
- Enough equity in the property - in other words, its value has risen enough to allow you to borrow more.
But what if you've already retired, are no longer earning and you've already paid off your mortgage? Then you can think about 'equity release'.
What are equity release schemes?
Aimed at older homeowners, these are a way to unlock tied up capital in your home. This is how equity release schemes work:
- A proportion of the property is normally sold to a company providing one of these schemes.
- You do not have to move - you can still live in your home.
- In exchange for giving up a share of your home, you get a lump sum to spend or invest.
- The equity release company gets its share when you die, sell your home, or move into long-term care.
There are fees to pay and there are strict conditions. Generally, you need to be at least 65 years old. You can borrow around 30 per cent of the value of your home - but it must be worth more than a certain amount.
Key pros and cons of equity release
Pros
- For anyone who's elderly, it's a way for them to stay in their homes and get extra income.
Cons
- Equity release schemes may be expensive, and you could find there are other cheaper ways to borrow money.
- The company will not give you the full market price for the share of the property you are giving up - they will take a part of it to repay the money they have given you.
- You will lose out on the growth in property values on the share of the property you've sold.
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