Homeowners in Liverpool will look to remortgage for all different kinds of reasons. One reason, in particular, is an uncommon choice – remortgaging to extend a mortgage term. In this article, we are going to discuss why people do this and how you can go about doing so.
You can find out more about the different types of remortgage across our website and in our remortgage guides.
So, you want to remortgage in Liverpool to extend your term… But why would you want to do that?
A mortgage term is how long you have to pay off your entire mortgage. This length of time will have been specified in your contract when you took out your mortgage with your lender. Usually, mortgage terms last between 25-30 years. This is a long time to be financially liable for something.
As you progress through your term, you may find that keeping up with your mortgage payments is proving difficult and that you are left with a small amount of disposable income per month. Due to the cost of living and an increase in bill payments, you may find it more beneficial to remortgage and extend your mortgage term to save that little bit of extra money.
So, what happens when you extend your mortgage term? Essentially, you are stretching your mortgage payments across a longer period of time, therefore, your payments per month will decrease. However, since you are borrowing for longer, you should expect the total amount that you have put into your mortgage to have increased.
Yes, there is a possibility that you can extend your term and release equity from your home in the process.
Truthfully, you can probably extend your term on any remortgage path you’re looking to take. More popular options include remortgaging for home improvements or consolidating debt into the mortgage whilst extending the mortgage term. People usually extend their term whilst remortgaging for these reasons to put them in a stronger financial situation.
As we have mentioned above, remember that as your term is increasing, so the overall amount that you spend on your mortgage will increase. You will also end up paying more interest overall by the time your term has come to an end.
You should think carefully before securing other debts against your home. By adding your unsecured debts to your mortgage, which is secured on your home, you are potentially putting your home at risk if you cannot make the required repayments.
Although the total monthly cost of servicing your debt may have reduced, the total cost of repayment may still have risen as the term of your mortgage is longer than it may have taken to repay the debts originally.
There may be some scenarios where you may not be able to extend your mortgage term. A lender, when deciding whether you are able to do this or not, will look at various factors before accepting your remortgage application.
If you are looking to remortgage in Liverpool to extend your term, your lender will look at your age, type of mortgage and any mortgage debts. At the end of the day, it is up to your lender to decide whether or not to allow you to remortgage to extend your term.
If your lender comes to the conclusion that you are not able to do this, there may be other alternatives that could potentially lower your mortgage repayments. Your Remortgage Advisor in Liverpool will discuss these options with you during your free mortgage appointment.
This scenario can become complicated very quickly, therefore, not all mortgage lenders allow you to do this. If you are allowed to do this with your interest-only mortgage product, you will have to know that you will still owe the lump sum of interest once your term concludes. This total could be larger due to the extended mortgage term on your product.
Additionally, the majority of residential properties will be on some variation of a repayment mortgage, as a residential interest-only is much less frequently occurred in modern times. You will find that it is more common to find an interest-only linked with a buy to let property.
This will bring its own challenges. You will have to compensate for the increased lump sum and you will have to try and convince your lender to extend your term with a tenant still living within the property.
A possible option could be to remortgage and replace your interest-only mortgage with a repayment mortgage. This would allow you to pay back the capital and the interest combined.
Before remortgaging and switching products, we would recommend seeking remortgage advice in Liverpool. Switching to the wrong product could put you at risk of losing large sums of money.
If your financial situation has improved since taking out your mortgage, you may consider shortening your mortgage so that you can pay it off quicker. In turn, this will of course increase your monthly payments.
You will also end up paying the bank less back overall due to less interest being built up. Just like when you extend your term, you will need to pass lenders’ affordability checks before you will be able to continue with your remortgage.
There are other ways to save money each month that does not require you to extend your mortgage term.
One example would be downsizing. Downsizing is where you sell your current home and move into a smaller property instead. As a general rule of thumb, smaller homes cost less due to having a lower mortgage.
Another example, for those over the age of 55 and a property worth at least £70,000, would be to release equity in Liverpool. This could allow you to release funds tax-free from your home, either as a lump sum or in occasional payments, through a lifetime mortgage. This may not necessarily mean that this is the best option for you. If you are over 50, you may also want to look into retirement interest-only mortgages and term interest-only mortgages (also known as RIOs and TIOs).
Similarly to equity release plans, with RIOs and TIOs, your loan will only be repaid when you are dead or have moved into long-term care, with your home being sold at either stage.
One of our mortgage advisors in Liverpool will discuss alternatives with you, advising on the most appropriate path to take, based on what you wish to achieve, as well as your future plans.
To understand the features and risks of equity release and lifetime mortgages, ask for a personalised illustration.
A lifetime mortgage may impact the value of your estate and it could affect your entitlement to current and future means tested benefits. The loan plus accrued interest will repayable upon death or moving into long term care.
Last edited 03/10/2022