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What Is a Remortgage and What Is It Used for?

A remortgage is effectively a loan that is borrowed against the value of the property. In some instances, you may have paid off your mortgage, but wish to borrow against the value of the property. Similarly, you may just want to find a better deal in relation to your current mortgage. So make sure you step back and do some research first.

The Reasons People Choose to Refinance?

There can be a number of reasons as to why someone would choose to refinance. For example, many people are given a mortgage with an attractive mortgage rate initially, but this rate may only be apply for a short period of time. As such, you will often find that you are placed back on a standard variable rate once the promotional rate expires. However, if you're eligible to refinance, you could attain a more attractive rate.

However, you need to be vigilant in this regard, and you should start searching for a deal around 14 weeks before the deal you are currently on ends. This ensures that there is enough time to get the administration in order to ensure the transfer can go through without incident.

The Value of Your Home Has Raised in Value Dramatically

The UK has seen a number of changes when it comes to the mortgage sector, and the recession did create a number of problems. However, this does not mean that a property does not have the opportunity to rise in value, and many do, frequently. As such, you may find that your property is in a lower loan-to-value band, which makes you eligible for cheaper rates. However, you simply should not just go out and refinance without doing your calculations first.

You Require More Flexibility in Relation to Your Mortgage

There are times when some of us can come into a small windfall, and the more sensible of us will often want to get our financial affairs in order. However, obstacles can be put in our way if our mortgage does not allow you to pay extra, or caps the limit you are able to pay.

A new loan can allow you to find a deal that is more flexible, as well as potentially offering a better rate. However, this is another scenario that requires you to do your sums, as you have to account for early repayment charges and exit fees, so this has to be compared to how much you would save moving forward.

However, do not assume that having a series of fees to contend with means that it is not better value for money, as a few calculations will allow you to see if there is any benefit in applying for a new loan.

Is Remortgaging Always a Good Option?

While remortgaging can be beneficial in some instances, it is not always the best thing to do, it really depends on your circumstances. For example, it makes sense to search for a better rate, but if you have had some issues with repayments recently, then you will probably find that you are not able to take advantage of a new rate.

Lenders who specialise in remortgages will want to ensure that the money is repaid, and may reject applications that cannot pass a credit check. Do not assume that this is the end, as there is certainly no harm in you looking at your credit report, and seeing what can be done to help get an application accepted in the future.

The Best Way to Go About Remortgaging

Once you have ascertained as to whether a new loan is suitable for your requirements, you then have to source a lender. While it may be tempting to go with the one that promises the most perks, you should not always take this at face value. That is not to say that the companies looking for your business are unscrupulous, but it doesn't hurt to see what offers are available that may be better suited to your circumstances and budget.

You also need to ensure that your financial records are in order. This could be an easier endeavour for some but a harder one for other. If you have been employed in a full-time position, then it is likely you will have access to a number of payslips, which will prove to be beneficial in securing your loan, assuming that all other aspects are in order.

However, if you are self-employed, it may not be as straightforward as this, as potential lenders can see self-employment as a possible risk. This doesn't mean that you cannot benefit from a remortgage, it just means that you will have to provide more information when it comes to showing your current cash flow in relation to your business and as such, you will be expected to produce documents in relation to the business, such as tax returns and business accounts. Some lenders may even want to see projections for the next couple of years, so the more information, the better.

If in Doubt, Speak to an Independent Mortgage Advisor

Although we know what needs to be done, getting around to the task in hand can be difficult, especially if we are busy with other aspects of our lives. However, the fact remains that sourcing a suitable remortgage solution is important, so a little help can go a long way. An independent mortgage advisor will be fully vested in which approach is best given your current circumstances, and look at a solution that suits your needs.

They will also be able to shop around for the best deal, saving you even more money in the long run, as well as a great deal of time.

Have Discussions with Your Current Lender

Once you have an idea of what rates are available, it can be tempting to jump ship as soon as possible, but do not be so hasty. Many financial institutions are keen to keep your business, and in some instances may be able to meet the rate you have found elsewhere. Of course, this will not always be the case, but it never hurts to ask the question.

Find Out if You Require a Legal Expert

It is not uncommon for those looking to refinance to need a legal expert, so it is worth checking on early on. Some lenders may operate alongside a legal time, whereas others may choose to leave it in your capable hands. However, it is always worth checking as to whether you require legal expertise, and whether the company you are looking to use is able to liaise with the legal expert in chasing up matters in relation to the remortgage. Finding out exactly what the lender is able to so on your behalf could actually prove to be beneficial in the long run, as it allows you to alter your budget and schedule accordingly.

What Fees Are There to Consider?

Although there can be a number of benefits associated with a new loan, it's important that you look at all aspects. An important factor to consider can be the fees associated with remortgaging. The initial fees may not seem like a lot in the first instance, but if you're someone that refinances their property frequently, then these fees can soon add up.

It can also be advisable to pay the fees upfront if possible, as they may be included within the loan which could mean they're subject to interest. There are also the fees that could be incurred from your current lender to consider. Some may instil an early repayment charge, which can be calculated in one of four ways:

  • A number of months interest.
  • A percentage of the amount that has already been paid.
  • A percentage of the original mortgage amount.
  • A percentage of the balance owed.

You should look to include such charges in your calculations, to ensure that the remortgaging of your property is a positive step, and that it is not going to cause you any financial problems moving forward. Many lenders will also charge an exit fee if you choose to move to another provider and this is often stated within your original mortgage contract.

Overall

Remortgaging your property can be beneficial for a number of reasons, and can also be detrimental if not used in the right way. As such, you should ensure you weigh up the pros and cons before applying for a loan, or you could find yourself in financial difficulty moving forward.

However, if you have considered all your circumstances and have found that you could actually benefit from refinancing, them finding a lender is the move. However, this again is something you should carry out some research on to ensure that you are getting the best deal possible.

Remortgages

A Happy Couple
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Rates from 1.35% *
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Borrow £25,000 to £5 Million
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Property Purchase and Re-mortgages
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CCJ's, Defaults and Missed Payments
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No Initial Credit Check
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REPRESENTATIVE EXAMPLE: On a repayment mortgage of £141,500 over a term of 360 months on an initial fixed rate of 5.39% for 24 months followed by an variable rate of 5.3% over 336 months the initial monthly payment would be £793.68 broker fee £1495, the total cost of the loan would be £285,019.64 and the APRC would be 5.6%. Rates as of 14/12/2016.

The actual rate and products available to you will depend on your individual preferences, needs and circumstances. The example of 5.6APR or less is representative of products that have been available to at least 51% of our clients. For full details of our services please review our Disclosure Document.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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