How does Remortgage Loan Investment Work?

Remortgage loans are essentially a second loan against your existing property. In most cases, they are used to pay off the first mortgage in order to refinance or secure a better mortgage option. If you take a second loan against your home, you can elect to do so at a higher rate than your prepayment quote, meaning you will have extras cash on hand. In this case, you can invest the money.

Advantages of Remortgage Loan Investment

The main advantage of this option is to pull equity out of your home, which may be appreciating at a slow pace, and place it into an investment appreciating at a higher rate. Real estate, other than speculative real estate, is typically a slow and steady investment option. Other investments, such as some commodities investments or private equity opportunities, may allow your money to grow faster.

Risks of Remortgage Loan Investment

The goal is always to put your money in the place where it will appreciate fastest. However, consider how often you or your advisers have been wrong about an investment. When you pull money out of your home, you are losing equity and going further into debt. Your monthly mortgage payments may increase. In the end, this will not be worth the loss if the payout from the investment is not high enough.

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