Alternative Finance Options – Remortgaging

Many people have experienced a time in their life where they have needed to turn to an additional form of finance, whether this is to make a one time purchase such as a car or simply to help guide you through from paycheck to paycheck. Finding additional methods of finance can be a very time consuming activity, especially when there are so many different options that are available and promoted to us. We see it every day, on the TV, radio and papers about some form of finance being available to us, from credit cards to overdrafts and personal loans. For many of us, learning about how we can borrow money in the most cost effective way is something that we will always struggle to understand.

There are so many different aspects of borrowing that we need to pay attention to so we can fully understand the total costs involved and decide what borrowing method will be best for a certain individual. With many loans, credit cards and overdraft facilities, the period in which you get to repay the borrowed amount can vary from a couple of months up to 5 years. For people that are looking to borrow smaller amounts, these methods may be first choice as with borrowing smaller amounts the interest rates are usually higher and the repayment term is also usually a lot shorter when compared to borrowing a larger amount of money.

Why Remortgaging your house could help with your finances

remortgage_guide_header

Like many other finance options there will always be pro’s and con’s of which borrowing method to take, however when it comes to remortgaging your home in order to access a lump sum of cash this could well be the best option for you.

Remortgaging is a relatively straight forward concept, and is a strategy used by many people in order to gain access to a large lump sum of cash. Many people opt to buy a second property and invest the cash whilst others will use the more common approach of using the cash to fund home improvements which could also increase the value of the property.

Remortgaging in a nut shell

House Value = £200,000

Deposit = £20,000

Time at address = 5 years

Total mortgage repayments (over 5 years) = £50,000

Remaining Mortgage amount = £130,000

Total Equity Available = £70,000

Based on the above example, a £200,000 remortgage will release £70,000 worth of cash given that there is only £130,000 remaining to pay off on the £200,000 mortgage due to an initial £20,000 deposit when first purchasing the house and a total of £50,000 that has been paid in mortgage payments over the 5 years that the house has been occupied for.

This approach is very common among property developers who use this approach to raise enough money for a deposit on another property or simply improve a house to increase the value of the property. Remortgages work exactly the same way as a normal mortgage does, simply put, a remortgage will pay off your existing mortgage of £130,000 and leave you with £70,000 of cash. The mortgage itself will usually be spread out over a 20 – 25 year period just as any other mortgage.

Remortgages can be a great alternative to taking out a large sized loan and it is likely that the interest and repayments will also be cheaper as opposed to taking out a personal loan with a financial provider. Before remortgaging your home, you should always weigh up the risks involved such as failure to keep up with the remortgage payments could result in your home being repossessed.

 


Need Help To Build Your Credit Score?

payday loans credit score

How to improve your credit score

A negative credit rating can really affect your chances of borrowing money whether you’re applying for credit cards, loans or mortgages. If your credit rating doesn’t have strength behind it then you will struggle to get accepted in any type of finance but luckily there are a fair amount of things you can do to build it up to a strong enough score helping you get to a position to be able to borrow and helping fix problems you already have.

The importance of having a healthy credit score
Your credit rating is what helps lenders determine weather to lend you money or not, maximum amount for you to borrow and come to a decision on what interest rate they will offer.

What impacts your credit rating?

Spam applying:

Applying for multiple types of credit at once can damage your credit rating, every time you apply for credit it shows up on your credit report so staggering your applications will work better for you. If comparing rates is all you’re after then be sure to check if your lender in mind can put through a ‘quotation report’ instead of registering a ‘credit application search’ this way it won’t leave a negative on your credit rating when you try to find yourself a lender in the future.

Existing debts:

It’s no surprise that high levels of existing debts will have a negative effect if trying to lend more money credit card companies and banks will notice this and may feel you’re already struggling to manage the debts you’re already in leaving them thinking you’re unreliable with money.

Missed or late payments:

If you’re making late payments or missing them weather you’re credit card, personal loan, mortgages even gas and electricity bills each time you do so leaves a mark on your credit score for up to six years.

Open accounts:

Lenders will look into if you have any open credit card accounts and not only to see how frequently you use it but to see how much credit is available.

CCJ’s:

If you have a County Court Judgement from unpaid bills this will mark your file for six years and also be seriously damaging to your credit score.

Credit Report Errors:

Lenders will check your credit report in order to determine your credit score, in the credit score process.
If there are any mistakes on your credit report or incorrect information this will go against you i.e. There has been someone fraudulently apply for credit with your name and details without you knowing. It is advised to ask for a copy of your credit report to look over for these mistakes, you have the legal right to get a copy of your credit report for £2 and if you come across any incorrect information contact the credit reference agency immediately and inform them so it can be investigated and removed.

Electoral Registered:

If you’re not on the electoral register this will go against you as lenders use that information to verify that you are who you say you are.

Joint Credit:

Lenders will look if you have joint forms of credit such as loans, mortgages and even bank accounts with someone who has poor credit history if so then this will have a negative affect when trying to gain credit. This is known as ‘financial association’.

Moving home:

Lenders feel more comfortable offering out credit if you haven’t moved house a lot evidence that you have lived at one address for a long period of time gives some reassurance to the lender.

What can you do about it?

If you have a poor credit score or you don’t have any history of borrowing for the lenders to look over there are some steps you can take to build or improve your credit score.

Cancel your unused credit cards:

Any credit cards you have that you don’t actually use you should cancel, this will also reduce the chances of falling victim to fraud if you lose a card or if it were to be stolen.

Stop applying for credit:

You should stop applying for credit until you have improved your credit score or sorted problems found on your credit file.

Getting on the electoral register:

If your name is on the electoral register this will help when trying to get credit you can also register to vote by post or online.

Improving your credit rating over time

If you aren’t in any rush for credit but want to strengthen and build your credit score proving to lenders that you can borrow responsibly will help. This will help improve your credit score over time.

Make repayments on time:

Paying on time and paying off balances on your accounts early helps massively. It shows lenders that you’re sensible with credit. If you choose to use your savings to pay off debts remember to keep enough cash aside in an easy access savings account in case of emergencies. Only pay off larger sums of your debts if you are certain you can afford it otherwise you may end up having to take out more credit a short time after.

Credit-builders:

If you have a poor credit history you can still apply for a credit-builder credit card but be aware that interest rates will be much higher than your every day credit card.
The annual interest is usually over 30% so you need to make sure you pay off the full balance each month. Otherwise you will get into debt which you may find difficult to get out of and this will only damage your credit score even more.
Typically credit limits on these types of cards are low.

There are also some prepaid cards that have options for credit-building that can help improve your credit score. This works by being loaned a certain amount of credit, usually around the £60 mark, by the prepaid card company. There is a credit agreement you have to sign in order to agree paying the card company a monthly fee of £5 to repay the £60 loan the company has lent you. When you reach the end of the year, giving that you haven’t missed any of the fee payments, it shall be recorded on your credit report as 12 months of successful repayments.
Prepaid cards don’t come free though all cards charge fees so be sure to shop around different companies to one with the lowest fees.

Avoid credit repair companies:

Credit repair companies will advertise claiming to repair your credit rating yet all they do is negotiate with companies that have sought CCJ’s (County Court Judgments) against you. You will also come across companies that will offer services that they can’t actually do by law and others bend the rules encouraging you to lie to credit reference agencies.
These firms always will seem too good to be true and that’s because they are offering a service that isn’t always completely legal.
Remember with the steps given above you can improve your credit rating yourself at no cost which we highly recommend.

Many lenders do offer no credit check payday loans which may be of interest to many people who do not have the best credit score rating. No credit check payday loans use other metrics to determine whether you are suitable for a loan, such as employment history, monthly income, monthly disposable income and even how often you get paid.