Remortgage Explained
Most homeowners will have to consider getting a remortgage on their existing mortgages for a number of reasons. Although getting a remortgage is not the solution for all mortgage and debt problems, home owners can still save a lot of money if they remortgage their existing mortgage loans. Remortgaging is usually done to consolidate credit card or other debts, improve credit scores, release equity built on homes into cash for urgent renovation or some other purpose, get better rates of interest, and so on. Here is almost everything you need to know about remortgages.
What Is a Remortgage?
A remortgage is a loan package that replaces your existing mortgage loans with a brand new loan. The existing mortgage loan is completely paid off and you are left with a fresh mortgage deal with a better rate of interest, affordable monthly payments, and great introductory offers.
Sometimes, remortgaging is done to consolidate credit card debts and other debts. In this case, all the debts are paid off and the borrower is left with just one loan to deal with.
Remortgage Rates
If you want to remortgage your existing mortgage loan, you must first start shopping for remortgage deal, a task that is easier said than done because there is a wide range of remortgage deals in the market. The easiest way to find the best remortgage rates is to hire a mortgage broker and let them do the research for you. If you do this, you will ultimately end up with the best deal although you will have to pay broker’s commission.
Alternatively, you can visit a number of online mortgage advisors, mortgage lender sites, and mortgage companies online to check out various mortgage rates and products online.
Remortgage Costs
Remortgaging is an expensive process, and before applying for a remortgage loan, you must understand the various costs involved.
1. Product Fees
These are the fees charged by lenders for their remortgage deal.
2. Valuation Fees
Since the current value of your house is one of the factors taken into consideration while originating a remortgage, you will have to value your home and pay valuation fees for it.
3. Legal Fees
A lawyer is required to prepare the documents, transfer properties from one lender to the other, and see if everything is in order, which means that you have to pay the legal fees.
4. Broker’s Fees
Your mortgage broker will have to be paid for guiding you to a good remortgage deal.
5. Early Redemption Charges
If your existing mortgage has a clause requiring you to pay penalty for closing the deal too quickly, you will have to pay the early redemption charges, which can run into thousands of pounds.
Remortgage Types
You can easily get overwhelmed with the wide range of remortgage products flooding the mortgage market. Here is a brief introduction to various types of remortgages.
A fixed rate remortgage offers a fixed rate of interest, which means that borrowers will have to pay the same rate of interest throughout the term of the loan.
Flexible remortgages allow borrowers to adjust monthly payments according to their financial situation. If they get a bonus at work, they can overpay. On the other hand, if they come across an unexpected bill, they can underpay or take a payment holiday.
3. Tracker Remortgages
The rate of interest in case of tracker remortgages is not fixed; instead it changes as and when the base rate set by the Bank of England changes. This means that borrowers will have to pay higher rates when the base rate increases and lower rates when the base rate lowers.
4. Variable Rate Remortgages
Variable Rate Remortgages are similar to tracker remortgages, except that the rate is linked to the lender’s standard variable rate (SVR), and not the Bank of England’s base rate. This means that the rate can change as and when the lenders change their SVR.
Other types of remortgages include capped and collared remortgages, discounted variable rate remortgages, offset remortgages, non status remortgages, and many more.
How to Get a Remortgage
You can get a remortgage irrespective of your financial situation because there are mortgage lenders specializing in remortgage products for borrowers with poor credit, self-employed borrowers, borrowers with negative equity, and so on.
Talk to a qualified mortgage advisor or broker, shop for the best remortgage deals, negotiate terms with your lender, and sign on the dotted line only when you have thoroughly understood your remortgage deal.