4 Things You Probably Don’t Know About Remortgage
For many homeowners burdened with the high mortgage interest rates and huge repayments each month, a remortgage sounds like the ultimate saving grace.
Remortgaging is a process of moving from one lender to another usually to save money, and many can attest to the savings they enjoy from doing it. But it is just as tricky as any other mortgage. If you are not careful, it can do more harm than good.
Conveyancing Supermarket shares some remortgage facts to help you understand the option.
1. There are many reasons for doing a remortgage
One of the biggest reasons to remortgage is to take advantage of a lower interest rate, which, in turn, brings the repayments down. But you can also consider it to borrow against the home’s equity, improve the loan-to-value (LTV) ratio, or even find a better lender. It also gives homeowners some flexibility, as some lenders can provide a mortgage break or holiday.
2. Lenders can still impose criteria
Not everyone can apply for a remortgage. Lenders still maintain rigid criteria, which include the equity of the home. Based on the principle of LTV, a higher equity will more likely result in a lower ratio, which means the risk for the lender is low. To increase the equity may mean having to pay at least 15 per cent down payment on the property.
3. The deals can vary
Many remortgage programs are available which is why it is important to perform a remortgage comparison. Some companies can offer discounted or fixed mortgages, which may last for 2 to 5 years. After that, it will shift to a variable interest rate. Interest rates may also be based on the movement of the prevailing market interest. Others may provide a lower interest for a longer payment term.
4. Fees can make or break the loan
A remortgage is not immune to fees or charges, which can be a problem. Some lenders can take advantage of this by charging applicants exorbitantly. It makes the loan more expensive and the remortgage useless or even a bad decision.
A remortgage can tie anyone to a loan for decades. Making the right decision today will help prevent a possible long-term financial suffering.