If you own a real estate portfolio, it might seem like a natural instinct to want to remortgage it to pay off your own home. After all, if you’ve already got the mortgage on the real estate, why not use it to your advantage? Remortgaging your portfolio to pay off your own home can be a great way to reduce the amount of debt you have, but it’s important to consider all of your options before making a decision.
To begin with, it’s important to understand what remortgaging your portfolio means. Remortgaging is when you take out a new loan on the property you already own. If you’re fixed rate term is coming to an end, you can negotiate a new deal with your existing lender, or move to a new lender. At this point, you can negotiate new terms to release equity to free up cash that’s tied up in your investment property.
However, remortgaging your portfolio to pay off your own home isn’t always the best idea. You should carefully consider the pros and cons before making a decision. Here are a few things to consider when deciding whether or not to remortgage your portfolio to pay off your own home.
Pros of Remortgaging
1. Lower Interest Rates: By remortgaging your portfolio or an investment property, you can potentially get a lower interest rate on your loan. This can help to reduce your monthly payments and free up some extra cash. However, with interest rates currently higher than they have been for several years, this is unlikely to be the case at this moment in time.
2. Tax Benefits: By remortgaging, you may be able to deduct certain interest payments from your taxes. This can help to reduce your overall tax bill. However, this will depend on the country you live in and the tax laws.
3. If you’re remortgaging to release equity in an investment property, you can use the equity to free up cash and potentially pay of the mortgage on your own home.
Cons:
1. If you’re increasing the loan amount on your portfolio to release equity to pay off the mortgage on your own home, the amount you’ll pay on the repay on the loan on your investment property be higher: you’ll end up paying back more over a longer period of time.
2. Additional Fees: Remortgaging your portfolio may require additional fees, such as appraisal fees and closing costs. Make sure you factor these into your budget before making a decision.
3. Loss of equity: If the value of your investment property were to decrease, and you’ve increased the amount you have borrowed, the proportion of equity you have in the investment property reduces.
Overall, remortgaging your portfolio to pay off your own home can be a great way to reduce your debt and free up some extra cash. However, it’s important to consider all of your options and carefully weigh the pros and cons before making a decision. Make sure you factor in all additional fees, potential losses of equity, and the risks of defaulting on your payments before remortgaging your portfolio.
If you’d like to remortgage, seek the advice of an independent financial adviser or independent mortgage advisor. You might also be interested in our other articles on mortgages and remortgaging here.
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