For most Kiwis, a mortgage will be the biggest financial commitment of their life. It can be the most daunting aspect of buying a home but if you plan and manage your finances carefully, it doesn’t have to be such a burden.

However, sometimes life throws a curveball, and for many, they don’t have the financial reserves required at the time. If savings or a small loan are not an option, many people turn to remortgaging their home loan to free up some funds.

Remortgaging your home loan is a big decision, so before you take action, make sure you know and understand the commitment you are undertaking.

What is remortgaging?

Remortgaging, also known as ‘topping up your mortgage’, involves leveraging cash against your home in order to borrow more capital from your lender. This will result in your total mortgage increasing by the amount you borrow.

Depending on your lender, you will be able to remortgage when your property has generated a suitable amount of equity within the current LVR rules. Either the property has gone up in value or you have repaid some of the mortgage.

Why would I remortgage?

There are a number of reasons why you may decide to remortgage. Firstly, to renovate or landscape a property. Whether it’s a full-scale DIY project or a new kitchen, many Kiwis will decide to remortgage in order to make changes to their existing home.

Secondly, to help pay for a big expense. Whether it’s a family trip to America or unforeseen expenses, you may be able to remortgage in order to pay for it.

Lastly, if you have several large existing debts with various creditors, you may be able to consolidate those debts into one and add them to your mortgage repayments.

What am I committing to?

A mortgage is likely to be the largest debt you will encounter. For most people, it’s a debt you will carry for the majority of your life.

If you are intending to remortgage your existing home loan, you must be aware that you will be increasing the length of time you are paying it off. Additionally, when you increase your loans your interest and principal repayments will also increase which is why it will take you longer to pay it off.

Remortgaging is a massive commitment, make sure you have done your due diligence and have all the available information. On top of this, you need to be sure you are in a position to take out more money against your biggest asset; your home.

This means making a plan and forecasting how to manage your new mortgage payments. It is essential that you seek advice from a trusted mortgage adviser to understand your commitments when topping up your home loan. We will even find you the best options available for your needs.

At The Mortgage Supply Company, we are always excited to talk to Kiwis about ways they can relieve some of the stress that they may be feeling because of their mortgage.

If you have any questions about remortgaging then we would love to guide you through the process. So don’t hesitate to contact us.