The Pros and Cons of Releasing Equity With a Remortgage (VIDEO)
Once your mortgage term is up you’ll have the option to remortgage to a distinct or different lender with (hopefully) better rates of interest and terms. As part of any remortgage, most lenders give you the option to release some of the equity of your house and still have it as cash lump value. While this is a very tempting option for a number of people, especially those who are in debt or require a home renovation, a new car, or other luxuries, there are numerous pitfalls with going down this kind of route.
Let us take a glance at an example of whether issuing equity is financially feasible over a personal loan for a similar amount. Let us assume a couple wants to release $10,000 using their home equity. At a 3% interest rate on their remortgage, this will add around $50 – $60 extra 30 days to their mortgage bill over a 20-year period. In contrast, a personal loan of the identical amount over a five 12 months period will add around 3 times that amount – $180, 30 days over a 5 year period (assuming a mortgage of around 4. 5% APR).