How to Remortgage Short-Term Loans

Many lenders prefer not to remortgage short-term loans. Short-term loans represent a smaller potential profit to lenders. One strategy to remortgage a short-term loan effectively is to lengthen the terms of the loan, extending it beyond the original maturation date.

Why Extend a Loan in a Remortgage?

The main reason to extend when remortgaging is to secure a new mortgage at a lower monthly payment. Even though the interest rate on the loan may stay the same or go up a small amount, you will end up paying less every month by extending the maturity of the loan. This can provide you with extra spending cash during a time you need it, such as after a reduction in salary or after having a child.

What Are the Alternatives?

If you do not want to extend your loan, consider adding an additional down payment or additional collateral when you remortgage. For example, you can pursue a cash-out option. This would remortgage your property for a sum greater than the balance on your existing loan. The difference in the loans goes straight to you for immediate expenses. Please note that if you cash out without extending the life of your loan, you will have to budget for higher monthly payments.