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The actual definition of a remortgage is when a second
mortgage is taken out in order to pay off the first
mortgage. Usually this will involve the process of
transferring the mortgage from your existing lender to a new
one, you will not be left with two mortgages to pay as the
new lender will pay off the old mortgage and this will leave
you with your new mortgage with the new provider. If you
were just refinancing your house then this would not
constitute a remortgage, usually this is done when you are
staying with your current provider. There are many reasons
why a borrower would want to have a remortgage on their
property; the usual reasons for doing so are usually
financial ones. Many people will look to remortgage to save
money. Some of the most common ones include raising capital;
this could be for any number of reasons, this can include
the raising of capital for a major new purchase such as a
car, consolidation of existing debts or maybe to enhance the
value of the property with home improvements such as new
kitchens, extensions or carpets.
When and How to Remortgage
A remortgage is most common when the markets are increasing
and property prices are on the rise, people have what is
known as equity within their property. Equity is the trapped
capital growth of the property, for example if you bought
your property for £100,000 and over the next 5 years the
value increased to £125,000 then the equity within the
property is £25,000. When the borrower takes out a
remortgage of a property they can release the equity to gain
access to the money, when this is done the monthly
repayments will increase to reflect the new mortgage. From
the example mentioned earlier if your house is now worth
£125,000 and you have £25,000 of equity that you release and
your existing mortgage is £40,000 then your new mortgage
would be £65,000 and your new monthly repayment will be
calculated on that basis. Often this is a cheaper
alternative to financing projects than if you were to take
out a personal loan or some other form of financial
agreement.
There are many ways to remortgage your property and you do
not have to release any equity to remortgage, many people
will remortgage to simply get a better deal than they are
receiving with their current mortgage provider. It is
possible to save hundreds, if not thousands of pounds just
by switching. If you are considering a remortgage then the
first step you need to take is to get the current market
value of your property, the house prices over the last few
years have increased dramatically and your property could be
worth more than you realise. You can get a rough guideline
of the property prices from information provided online, but
a registered surveyor would be the best option. The surveyor
will be able to give you an accurate guide to how much your
property is worth in the current market conditions.
Research different Mortgages
Once you have gathered the information on how much your
property is worth the next consideration is to carefully
research the market along with the mortgage rate and asses
which mortgage will best suite your requirements. When you
compare the mortgages be careful to ensure that the value of
your mortgage reflects how much you have left to pay off and
not the original value of the property. It could be possible
that your current lender may have a better mortgage or will
work on a remortgage with you; if this is the case then you
will want to consider them as a viable option. There are
many different types of mortgage available and they all have
varying mortgage rates, and the main remortgage
options you have include fixed rate, capped, discount,
variable, base rate tracker and one account. Depending on
your circumstances, how long you have left on your mortgage
and the reasons why you are remortgaging will influence
which ones will best suite you.
If you have bad credit ratings or any forms of defaults
against you it is still possible to remortgage your
property. Just doing very quick searches across the internet
will provide lists of lenders that are prepared to offer
remortgage options to people with a few black marks on their
credit records. One major point to take into consideration
when remortgaging under these circumstances is that you are
more likely to pay a higher mortgage interest rate due to
the increased level of risk the lender is taking. Also, if
you think that you are likely to get rejected for your
remortgage then it is best not to apply, any rejected credit
case will show up on your records and prevent any future
credit being gained.
How a remortgage calculator can help you
In order to give you a good idea on what different types of
remortgage will help you and which may be the best options
to take it is possible to use a mortgage calculator.
The mortgage calculator can be found online and will provide you with lots of useful
information from many different lenders. They simple require
the following information in order to get started; first you
need to input the value of the property that you are remortgaging,
followed by how much you have left on your existing
mortgage. Then you need to provide information on any
redemption penalties that you may have for ending your
current mortgage, these can be a hidden cost that many
people forget and can vary considerably between lenders.
Next you need to check current mortgage rates and select
which type of mortgages you are interested in and which
lenders you would like to consider. There are other costs
that you can include to make the results more accurate as
well as the above and these include, adding in legal costs,
valuation fees and for how many years you want to take out
the mortgage. Once all of the information has been submitted
then you can get the results emailed directly to your inbox
giving you a good idea of what options there are open to
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