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Remortgage Guide

          Remortgaging on your existing mortgage loan can help you save money. In the housing market, mortgage rates raise and lower with the current economy. Shopping for a new loan during a time of lower rates could be to your benefit.

Choosing the Right Mortgage
Remortgage and mortgager loans are basically the same. These are the different types of mortgages you can go for when remotgaging:

  • Standard variable rate- usually the most expensive rate lenders use when a borrowers promotional rate has ended.
  • Fixed rate- this rate helps borrowers lock in at a certain rate for a period of time which helps for budgeting purposes.
  • Trackers- this mortgage rate fluctuates with the Bank Base Rate which constantly change. Borrowers choose this type to benefit from when the rates are low.
  • Capped rate- capped rate loans change with the Bank Base Rates but will not exceed a certain rate. One fall back is that after the capped term is over the rates are significantly higher.
  • Discount rate- this is like a promotional rate determined by the lender in which the rate reverts back to the lenders SVR whenever the discount rate is over.
  • Droplock mortgage- A discount or tracker mortgage that has the opportunity to become a fixed rate mortgage, should the borrower decide within a certain amount of time, without any penalty fees.
  • Cashback mortgage- A loan for more than the purchase price of the home that pays the borrower a certain amount of money to pay for expenses such as down payment or furnishings.

Why Remortgage?
There are benefits and downfalls to each of the different types of mortgages and many decide to remortgage to get a better rate or a mortgage more suitable to their needs. Remortgaging can also release equity from your home to pay for upcoming big expenses such as buying a new car or to consolidate debt. Equity can also be used to renovate or add an extension on your home. You may remortgage as often as you need as long as there is enough equity in your home.

What to Expect
There are steps to be taken when remortgaging and there is also a cost involved. Lenders often help with the steps and pay for some of the costs as promotional remortgaging packages.
           
            Here are some of the things to expect:

  • An application needs to be completed the same way you did when you applied for the first mortgage. A lender arrangement fee may be incurred.
  • A valuation of your home, which may result in a fee, will be sent to the lender to see if your property is still more than what you owe. The lender will sometimes pay this fee.
  • A conveyancing of the home will need to be done, complete with local searches if you are going to a new lender. If you’ve done a home buyers report or structural survey when you first bought the home it shouldn’t need to be repeated. There are fees for this as well.
  • Arrangements with your old lender to pay off the debt are usually done by your new lender. However a sealing fee may need to be paid as well as any early repayment charges from your old contract.
  • Stamp Duty is not due when remortgaging.

Why Not Remortgage?
Saving money and raising money are both very good things but not all mortagegs can be realistically remortgaged. Sometimes the Early Repayment Charges are so high that you wouldn’t be saving any money by getting a remortgage. Also, if you have recently become self employed you may not be able to qualify for a remortgage. Remortgaging a small loan may not be possible either. Most lenders require a minimum loan amount of £25,000.


 
 
     
 

 

 
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