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A Good Time To Remortgage?

by Alison Feemantle

Is Remortgaging for You?

It’s true that interest rates are at their lowest levels in years and this has led to many homeowners remortgaging in a bid to save on their monthly mortgage payments.  The good news is that many lenders are offering low interest products and products especially designed for those looking to remortgage.  Whilst many homes have dropped in value, you may still have enough equity in your home to consider a remortgage.  You may also want to take advantage of the low interest right now – this rate is not expected to rise until at least the end of 2012.

What Is A Remortgage?

A remortgage is simply a new loan which in effect replaces your existing mortgage.  You can obtain your new loan through your existing lender or you can choose to use a different lender.  There are many great deals around right now so it’s definitely worth shopping around for the best deal.  The remortgage process involves your old mortgage loan being paid off and any remaining monies made available to you to do with as you wish.  Before you rush off to remortgage, read about the penalties for early repayment of your loan below.

Why Would I Want A Remortgage?

There are many reasons why homeowners may wish to remortgage:

To make the most of lower interest rates

To pay for expensive items such as home improvements or a wedding

To consolidate debts such as car loans and credit cards

It’s important to remember that your mortgage loan is secured on your home so it’s essential that you are able to meet payments on time.

When is it Not a Good Idea to Remortgage?

Whilst many can benefit from remortgaging there are some circumstances where this won’t be a good idea.  For example, you may still be tied in to a fixed term deal and that means you will probably be liable for a penalty payment for paying off your mortgage early.  This can often amount to thousands of pounds in early repayment charges.  Also, if the balance of your existing mortgage is low you may find that many lenders are not willing to underwrite a remortgage or that the fees involved will be more than the savings you make by remortgaging.

Another reason to avoid remortgaging is if your employment has recently altered and especially if you have recently become self-employed.  Lenders need to know that you are able to repay your mortgage payments and they can often hold back when it comes to more uncertain incomes.  The good news is that there are many lenders relaxing these rules and there are also lenders offering specialist mortgage products for the self-employed.

How to Remortgage?

It’s a good idea to stick with your existing lender in many cases.  They often have great offers for existing customers and you may find the application process a little easier too.  Do check out the rest of the market though as more and more mortgage products are being released onto the market each week.  It’s a good idea to speak to a mortgage broker for free mortgage advice on the latest deals and products.

Once you have found the lender you want to use, the process is as follows:

The lender will need to know the value of your home

You will need to complete a new loan application

The lender will need some conveyancy work to be carried out to secure a title report

You will also need to engage the services of a solicitor to arrange repayment of the loan to your existing lender

The Cost To Remortgage

It costs varying amounts to remortgage depending on the lender, but it should usually cost you less than when you first took out a mortgage.  It’s essential to find out what other costs are involved in remortgaging.  Some lenders may waive fees and charges or at the very least reduce them if you are taking out another product with them.

Many homeowers reap the benefits of remortgaging by enjoying lower payments and if they have equity available in their homes, a little extra on the side.

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