Remortgaging

A decrease in the interest rates of the mortgage market is a constant cause for individuals nowadays to consider re-mortgaging their home. A re-mortgage is simply the process of transferring an existing mortgage policy from a current mortgage lender to a new mortgage lender. By doing this, the individual will be able to pay lower interest rates and may even obtain a better repayment facility on their loan. Re-mortgaging is become increasingly popular as they can save a borrower around £100 to £200 on their monthly repayments.

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When someone takes out a re-mortgage, the new mortgage lender will pay the old lender the remaining balance of the individuals’ mortgage. The borrower will then carry on making their mortgage payments to their new provider.

Another reason why someone may consider taking out a re-mortgage is to gain extra money to pay for home improvements such as an extension or a garage, they may even want to buy a new car or pay for their Childs wedding. By re-mortgaging their home a borrower can increase their existing mortgage and have the extra money earned as cash.

A re-mortgage could also be used for the point of obtaining a lower rate of interest on an existing mortgage or for raising additional finance by releasing equity in the property. The releasing of equity is a very good way of gaining extra cash. If the borrowers’ property has positive equity, then its market value would actually be more than the outstanding mortgage amount. Because of this, the borrower will be able to increase the amount of their mortgage.

A re-mortgage of a property will have a lot of advantages such as:

Reducing the rates of interest - A re-mortgage will always offer a better rate of interest than an existing mortgage will and will also make use of any decreases in the mortgage rates.

Raising capital - With a reduction in the interest rate, the mortgage monthly payments will also decrease. This will mean that the borrower can save money each month and will therefore save thousands of pounds over their re-mortgage term. By the borrower being able to raise this extra money, it is very beneficial to them in order to fund an important project such as starting a company.

Extending the loan term - With a re-mortgage a borrower is able to spread their mortgage payments over a longer loan period. However, this does not mean that they can reduce the loan period.

Debt consolidation – A borrower is able to consolidate their debts into one single loan payment with a lower rate of interest. This will mean that they will save extra money on the various interest charges as well as being able to repay their outstanding loans more easily.

A re-mortgage does however also have a few problems. These mortgages generally have numerous costs associated with them. One of the main costs is a redemption penalty. Other costs include valuation fees.

When a borrower is considering re-mortgaging their property, they need to decide which mortgage they want. There are two types available which are repayment mortgages and interest only mortgages.

After they have chosen this they will need to decide which type of interest they would like. There are a few of these to choose from such as fixed rates, variable rates, capped rates, tracker rates and discounted rates. They are advised to look at each type in detail with a mortgage adviser prior to obtaining their re-mortgage so that they can choose the best type of mortgage for their needs.

Due to the increasing use of the internet over the years, a lot of mortgage lenders actually have their own websites now. Because these mortgages have become more popular in recent years, there are a lot more mortgage lenders who are now offering them and because competition is at its highest they are offering them at really good rates.

By being able to search the internet for mortgage lenders, a borrower will be able to obtain free quotes and can therefore compare each lender to see which are offering the best deals. These free quotes will enable a borrower to see how much money they can afford to borrow and inform them of what the monthly payments would be. This will let the borrower budget their finances more easily and therefore only obtain a loan which they can actually afford.