So what is a remortgage? Simply a new loan that replaces your existing one. You can either stay with the same lender and get a new rate or apply to a new lender dependent on the remortgage rates available in the market at that time, and the best remortgage deals available to the individual. A remortgage will replace the original one and are used either to get a new rate or a means to raise capital.
When it comes to remortgages there is sometimes confusion surrounding the term remortgaging and secured loans. They are fairly similar in lending apart from rates, secured lending will cost more. They both have a legal charge on the property in question. With a remortgage you have the choice from the whole of the market place, with a secured loan there are no more than 20 providers, thus less choice. A remortgage will allow you to borrow up to 90% loan to value, subject to credit score and income, where as a secured loan you would normally be looking up to a maximum loan of 100k subject to you having equity in the property up to 70-75% after drawdown, plus income to support new loan.
Fixed rate mortgages are becoming increasingly popular at this moment in time, this is down to the current economic climate, people want the security that should interest rates increase, which they will, the property owner will from day one what the monthly repayments will be, the home owner will be tied into the product normally between 2- 5 years.
Those people who like to have a product that has low interest rates will most probably plumb for the tracker rate remortgage, this product will track The Bank of England base rate, if interest rates increase so will your mortgage payment to the lender, where as an offset tracker remortgage will link your current account with your mortgage account, instead of receiving interest on your current account this will reduce your mortgage account balance. This product is extremely popular with higher rate tax payers.
With such a increase of products available in the market place at this moment in time, we suggest that you seek advice either from a whole of market broker or an IFA, there are other types of product out there from buy to let remortgages, to variable rate remortgages, to numerous to discuss, speak to a specialist and get the best remortgage deals.
The Council of Mortgage Lenders has stated that in August 2009 lending for remortgages was only 25,000 this has dropped by 13 % on July’s figure and 19% lower than that of a year earlier. The housing market at this moment in time is struggling along, the main reason for this is that banks have had no liquidity to lend, thus have had to go to the government with their begging bowls out, the Government and the UK taxpayers have had to bail out some of the banks, the others have just left the arena for a period of time and are waiting to come back in when the market has stabilised itself.
Now, you may not believe this when looking at the news, but in October 2010 banks and building societies had some great news in this recession of ours, lending for the remortgage market had increased by 35% in the month previous, this was a huge increase and has brought back the appetite to the banks and building societies as they are all looking for market share in this tough climate, they have brought down interest rates and the high admin fees that they charge to entice the first time buyers, home movers and remortgage clients.
When looking at remortgaging there can be some great benefits, you could look at releasing equity to help your children through university, raising capital to pay off some of those highly charged credit cards, even personal loans and hire purchase agreements you have. We would always suggest that you seek advice before exploring this avenue as you are actually adding debt to yourselves over a longer period of time.
Remortgaging may seem simple, well so you thought! It has never been harder to obtain finance since the inception of the credit crunch, lenders have decided that they only want the certainty that the client looking to remortgage has a good clean slate, they are not looking for clients that have recently missed a payment for example on a credit card or an unsecured debt, if you have lenders will not even look at remortgaging your existing property once they have done a credit score on you they will decline the application. Your best bet is to make sure that you check your own credit score prior to an application, you can do this online and it will give you an idea or whether to waste time applying for a remortgage in the first place.
Completion of that lengthy remortgage application form, this will require you to bring along all relevant documentation ID and address verification for money laundering purposes, have a credit score done online through either your local bank, IFA or whole of market mortgage broker, once this has been clarified all relevant information that you had brought along to the meeting will be sent to the lender for checking, once satisfied they will instruct valuation on your behalf, in the meantime your solicitor will be writing to existing lender getting a redemption statement so when the funds come through they will be able to pay off your existing liabilities, once this has been concluded the remaining balance will be sent to you. So if you want the best remortgage deals start searching now.
James writes for Just Remortgages one of the UK’s top sites for information on the latest remortgage rates, and best remortgage deals available in the market.
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