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Complete Guide to Mortgages |
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ReMortgaging
A remortgage is just like taking on a normal mortgage with one main difference -
you're not buying a house. You choose the rate you'll pay, method of repayment and
type of product in the same way. What you are doing is taking out a new mortgage to
repay the old one. You don't have to change lenders to remortgage - although many people
do. The point is to find a deal that will improve on your existing mortgage. Reasons for
remortgaging vary - the main ones are:
Save
money: Re-mortgaging
can significantly reduce your monthly outgoings,
saving hundreds or even thousands of pounds each year.
Reduce
length of loan: with
extra money each month and more flexible products it
is possible to overpay your mortgage loan and pay it
off early without incurring any redemption penalties.
Release
equity: By
re-mortgaging for a sum that is greater than the
amount needed to repay the original mortgage, you can
release money to purchase a new car, make DIY
improvements or invest in a second home.
Change
product: If
you get stuck with a standard rate that isn't
competitive or with a poorly performing endowment
mortgage you can change product with all the options
available when first taking out a mortgage.
Dissatisfaction
with lender: There's
no need to stay with an unsatisfactory lender as
switching from one provider to another has never been
easier.
More
flexibility: Re-mortgaging
from a standard mortgage to a flexible, CAM or offset
product will allow you to underpay, overpay and have
the means to release equity without having to get
permission from your lender.
Costs
and penalties:
The
lender will not rely on your original survey when
assessing the remortgage value of your house, so there
will be a charge - as there would be for a normal
mortgage. There will also be legal costs and possibly
administration fees - although these aren't likely to
be as much as with a totally new mortgage.
Many lenders offer remortgage packages that refund
these costs on completion of the deal, providing you
use their recommended surveyors and solicitors.
Where you may face large costs is if there are
redemption fees associated with your existing
mortgage. If you are within an introductory offer
period with a fixed, discounted or capped rate of
interest, you will incur an early redemption penalty.
Some loans have an overhang period after the
introductory time - this may cost thousands.
However, it is always worth weighing up the savings
you can make with a remortgage against the costs and
penalties. It may be worth paying these for the
benefit of the new loan, particularly if the
redemption fee is small.
Timing:
Although
the process of re-mortgaging is similar to getting a
normal mortgage, it is faster as you're not buying a
home. Depending on the lender, it should take around
six weeks. If you need to remortgage fast, some
lenders offer fast track services that can complete in
as little as a week but this does depend on your
individual circumstances.
It's also important to consider when you want to
complete the deal. If you are re-mortgaging from a
lender who charges interest to the end of the month,
you should remortgage on the first of the month so the
old and new mortgages don't overlap.
Which
mortgage?
Choosing
the mortgage product when you are re-mortgaging is
just as important as the first time you take out a
loan. You need to consider your finance requirements
and your general lifestyle. It will be a strictly
individual choice but common reasons for choosing
certain products are:
Fixed
rate: You
don't have much mortgage to pay off but want to do so
securely to a predetermined budget in set monthly
amounts.
Discount:
You want
to release a sum of money at the beginning when the
initial rate is low but then return to manageable
repayments.
Tracker:
You are
confident rates will stay low and want to save money
on interest repayments.
Flexible:
You now
have more income and want to be able to overpay
to pay off your mortgage early
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