Is It Easy to Borrow Money on Your Mortgage
There are several reasons why individuals often borrow. For instance, one may want to borrow to finance home improvements. Others may borrow to pay school fees or acquire an auto. But where can you borrow? Which type of loan should you go for? Are you thinking of borrowing money on your mortgage? Well, in this discussion, we are going to see whether it is really easy to borrow money on your mortgage. We will also help you determine whether it can be the right move for you.
There are so many reasons why you may want to remortgage your home. Maybe your prevailing mortgage is ending, or you just want a more competitive deal. Still, you may be intending to remortgage to be able to borrow more. Extra borrowing refers to a situation where one remortgage in order to enlarge the size of the mortgage. The additional funds obtained can then be used for other things, such as home repairs or paying college fees.
Is it easy to borrow on your mortgage?
You may be having a genuine reason for seeking additional funds. But whatever the case, it is always very expensive. It is easy to borrow, but it may not be a good thing for you. One of the reasons behind this assertion is the fact that you are risking your home. Financial experts advise that you consider making this decision when you really need funds, and there is no other way. It has to be the last resort. Here are the basic things that you need to consider.
Do you have to borrow?
It is vital to plan and budget for a loan. Even if you have good reasons for borrowing, it may still be unwise if you proceed and borrow without having a proper plan on how you are going to repay the loan. It is always advisable to plan and budget before deciding to borrow. If you can save and use repay the loan, then things can work out for you quite well. In case you cannot afford to do that. It will be an act of kindness to yourself if you remember all the risks associated with borrowing on your mortgage. It never has and will never be a cheaper option. More importantly, in case you intend to borrow to pay off a prevailing debt, you will be making a poor decision. Never do that. If you are overwhelmed with debt, there are other ways of dealing with that condition instead of borrowing on your mortgage.
Should one use a mortgage to raise additional funds?
There are several reasons against this move, but let us focus on two main ones. First, you will be at a higher risk of losing your home. Second, it is a costly option and involves a lot of adjustments. For instance, you have to take into consideration the modifications made on your repayments of the mortgage. Let us break down these reasons a little bit further.
- Risking your home
Is a mortgage secured or an unsecured loan? It is secured. But who benefited from the security? Not you but the lender! What does this mean? Well, the lender has the right to seize the property and use it to regain the outstanding debt amount in case you cannot pay. For this reason, it will always be better to have an unsecured loan for your home to remain safe in case you cannot afford to repay. The collateral may indeed make the interest rate comparatively lower. But it is still not worth it considering the risks that you can suffer.
- It is an expensive option
While the interest rate is significant, the interest cost is what counts in this regard. Which option do you think is better here, borrowing $20,000 on a 10% loan or taking a 5% mortgage? I know the answer seems simple and obvious. But that is from face value. If you feel a 5% mortgage is cheaper, then you lack all the material information needed to put matters in the right perspective. The total cost of any debt is determined by both the rate of interest and the duration of borrowing. And by the way, a mortgage is a type of loan only that it takes relatively longer to pay. In many cases, a high interest that has to be paid quicker turns out to be the most inexpensive option.
What if you have decided to borrow?
We have seen why it is not the right idea to borrow on your mortgage. But what if you have already decided to borrow? There are still three critical things that you need to consider. Each of these options has advantages and disadvantages, and therefore, you still have to be very careful. Let us see.
This means going to your mortgage provider for an additional loan. This option can be comparatively cheaper and quicker. However, no one can guarantee that you will be offered an additional. The following holds.
- Your prevailing loan should have existed for at least six months
- The additional loan should have a distinct interest rate
- You must have a good reason for applying
- You have to apply.
In this arrangement, a borrower is allowed to pay the current mortgage by applying for a new one on the same home but a different lender. However, this is also not the right move.
These are loans that are specifically provided to homeowners. The mortgage provider can sell the home to regain the loan amount in case the borrower cannot repay. It is secured but from the lender’s perspective, not the borrower.
The Bottom Line
It is not hard to borrow money on your mortgage. Most mortgage providers are often willing to provide additional financing to borrowers. Nevertheless, it is not an excellent idea. It can be quite expensive, apart from risking your home. The best thing to do is to seek alternative ways of getting funds, preferably unsecured loans. In case you need instant cash, you may visit payday loan Singapore to borrow cash online.