Most people do not realize that their mortgage is not just a loan but a financial instrument they can leverage for many things. You can use it to build wealth, pay off debts, and more. Instead of seeing your mortgage as another debt obligation, here are the best ways to take advantage of it.
Borrowing Against Your Equity
If you have the right property in a great location and with other factors working for you, the property’s value might have increased since you took out a mortgage to buy it. In such cases, you might pursue a mortgage release option on your mortgage equity. Mortgage equity is the difference between the amount you owe your lender and the home’s current value.
Releasing a property’s equity allows you to access the equity you have built over the years. You can borrow against this equity and have money for whatever you wish. Savvy investors use this money to buy additional property or make other investments that go towards helping them build additional wealth.
Using a Refinance to Consolidate Debt
Debt consolidation is an excellent option for those who want better control over their debts. When consolidating debt, you borrow the money you use to pay all your debts so that you only have one debt to repay.
In the case of a Bristol remortgage for debt consolidation, you can use the money to end up with a lower interest rate on all your debts since you will only have to deal with one, often lower, interest rate.
Remember that once you remortgage in Bristol to consolidate your debt, you make your mortgaged home the security for the new loan. It is crucial that you talk to the professionals at The Mortgage Company so they can advise you if this is the best option for you and how to leverage it if it is.
Using Equity to Renovate
Renovating a home is costly and can cost thousands or even tens of thousands of pounds. Instead of releasing your home’s equity to invest in other properties, you can use it to renovate the home. Doing this is an excellent option for further increasing the value of your home.
Remember that releasing your equity entails borrowing a loan against the home’s value. You need a good credit score as you would with any other loan, and the released equity must be sufficient enough to borrow against. If you cannot pay off the new loan, you might be forced to sell the home to repay the new loan.
Reducing it Upfront
If you need a mortgage and want to pay the lowest interest rates or interest amount, you can buy it down. Doing so involves increasing the down payment you provide the lender when getting the mortgage. Once you do this, you have higher equity upfront, a smaller loan, lower interest rates and a new home.
Mortgages should not be just another debt you service but something you should leverage to build wealth and a strong financial future. It can also help you reduce your debts and invest in other properties if you know how.