25 Per Cent of Remortgages To Pay Off Loan Debts February 22nd, 2013
Whilst many people re mortgage their property simply to get a new cheap loan deal, others who have sufficient equity built up in their home may choose to release some of the cash tied up in their property when they take out a re mortgage loan, for a variety of purposes.
Traditionally, people who released equity through a re mortgage loan would use the funds as a home improvement loan, putting the money back into their property and therefore increasing the value, particularly when the loan is secured on their home.
However, there has been a shift in the use of funds from re mortgages in recent times, with more and more people using the equity in their home to repay their outstanding unsecured loans or credit card debts, or simply to help supplement their income and maintain their standard of living in the current difficult economic climate.
According to a recent survey from LMS property services, around one in four home owners who take out a re mortgage loan, are using the funds to repay existing loan debt or to spend on other items, although more than half are still using the funds as a home improvement loan.
Of those home owners who released equity from their property, around two thirds took an additional loan of at least £10,000, whatever the reason for the loan was.
Although taking a re mortgage to consolidate short term unsecured loan debts can save large sums of money on loan repayments each month, borrowers must remember that they will be paying the home owner loan for a much longer term, which could end up costing them more than the original loan over the full term.
Two thirds of re mortgage loan customers took out their new loan simply to get a cheap loan deal compared with their existing loan. Around half of borrowers who have done this have saved up to £500 per month on their loan repayments.