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The How-to Guide On Remortgaging
Choosing to remortgage can be great way to find a better loan deal. It can also be a convenient way to free up some extra finances to make home improvements or pay off debts. Another popular reason for a remortgage is to consolidate all existing debts into one tidy bundle.
The following guide outlines the most important steps to take when proceeding with a remortgage.
1. Research and budget
Without thoroughly doing your research on the different types of remortgage options available to you, you could end up with a loan that ranks the same or worse than your current mortgage deal. Carefully weigh up the facts to make sure that you will realistically be saving money. In some cases a remortgage could end up costing you more because some loan providers charge heavy early repayment penalties - bear this in mind when you choose a new lender as well because you might want the flexibility to remortgage again in the future if a great new deal becomes available. Also be aware when shopping around that while on the surface some loan offers seem fantastic, there can often be hidden fees in the fine print. It's also ...
... crucial to be clear on your budget capabilities when refinancing. It's a good idea to use a mortgage repayments calculator to make sure you don't stretch your pocket too far on your monthly payments.
2. Choose the right loan provider
As mentioned above, finding the right loan provider depends on thorough research and comparison, as well as a clear understanding of all costs involved. Bear in mind that your current loan provider might offer you incentives to keep you from switching to a competitor, especially if you have a good payment record with them.
3. Find the most suitable loan
Your choice of loan deal will depend on your particular lifestyle and needs. The majority of people opt for a refinance to rid themselves of an adjustable rate mortgage (ARM), which in effect is a raise in interest rates. Another reason is to free up extra cash by getting a home equity line of credit, meaning the equity your home has built up will provide added cash from your loan. You might simply be looking to take advantage of an offer for a lower interest rate. If so, choosing a 15 or 30 year fixed mortgage would be a good way to achieve this. All in all, it's essential to discuss your needs with lenders and have them clearly explain how they can match them.
4. The specialist option
If you find refinancing to be as difficult as learning a new language or have more complicated needs that are tricky to navigate, choosing a remortgage specialist can be well worth the extra expense, since they have the expertise to find the best deal. There are two instances where a broker would be particularly handy. Firstly, for those approaching retirement, converting some of your home equity back into cash liquidity is a great way to boost your funds when a salary is no longer coming in. Secondly, if you receive a home as a gift, you need only pay the taxes to own it in full. In some cases, you may want extra cash more than you need the property asset. A remortgage broker can help you arrange for a good loan based on the value of your gifted home, meaning a portion of the asset will be applied to the loan debt. As with finding a good lender, you're advised to do your research to find a reliable, unbiased broker who has the right experience for your needs.
There is a wealth of competitive refinancing offers available on the marketplace. All in all, taking out a remortgage can be highly beneficial if you do your research and keep to your budget.
Sean Raston is an economics student and expert in the remortgage process.
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