Tuesday 19 June 2018

Preferential Terms Can Be Preserved With a Remortgage

When an owner-occupier's original mortgage approaches its finish, the average borrower usually seeks out a remortgage because – if it has not been paid off – the alternative to a new deal is for their mortgage to revert to the Standard Variable Rate (SVR) of the original lender. Although an SVR can often be reasonably competitive, they are more likely to be worse than a negotiated deal.
There are, however, circumstances in which the SVR may discourage homeowners from seeking a remortgage, such as the present situation in the UK, where particularly low interest rates are making SVRs more appealing. There are also situations when a homeowner's property will not have built up enough equity to make a remortgage possible – again, this is largely due to the fallout from the credit crunch, which has made more and more lenders ask for a minimum 20 per cent stake.
Jim Giovinazzo Professional Financial Broker Nevertheless, if you are a homeowner and your property has built up sufficient equity, then you can save up to hundreds of pounds each year due to the generally more favorable interest rates to be found with a remortgage. The desire to get the best interest rates possible is of course the overriding reason that most borrowers negotiate a remortgage but other reasons for doing so include releasing the equity that is tied up in a property or using the extra wealth generated to consolidate debts – whether these be business or personal.
For homeowners who are really dedicated to cutting their monthly mortgage payments, it is possible to negotiate a remortgage ahead of the current loan's end. There may be extra costs associated with this, however, due to the fact that the current lender may well impose a penalty charge for ending the deal early. Furthermore, the borrower will almost certainly have to pay for another home survey before they can take out a remortgage.
When the decision is made to seek a remortgage, the question then turns to which provider to choose. Most people simply seek a new deal with their current lender, who should normally get in contact with the borrower before the current deal expires to discuss the matter. If the homeowner would prefer to seek a remortgage from a different lender, then the focus shifts to the mortgage market.
Due to the global economic downturn, this marketplace is not as packed as it was a few years ago. Most lenders are behaving with great caution in the wake of the credit crunch and they have fewer products out there to choose from. Of those mortgages that are available, they generally have less favorable interest rates than a few years back, plus a smaller loan-to-value (LTV) – typically around 80 per cent. As a result of this, a lot of borrowers will have to amass sufficient equity before they can obtain a remortgage.
This does not mean that there are not good deals to be found in the remortgage market, and as usual proper research and diligence can pay dividends. Most people will take on a professional trained mortgage broker to help guide them through this. Brokers are required to find the best deal for their client and are forbidden from recommending products that are only advantageous to them under a code of conduct overseen by the Financial Services Authority. They can also gain access to mortgage products not advertised on the open market.

There are, however, circumstances in which the SVR may discourage homeowners from seeking a remortgage, such as the present situation in the UK, where particularly low interest rates are making SVRs more appealing. There are also situations when a homeowner's property will not have built up enough equity to make a remortgage possible – again, this is largely due to the fallout from the credit crunch, which has made more and more lenders ask for a minimum 20 per cent stake.
Nevertheless, if you are a homeowner and your property has built up sufficient equity, then you can save up to hundreds of pounds each year due to the generally more favourable interest rates to be found with a remortgage. The desire to get the best interest rates possible is of course the overriding reason that most borrowers negotiate a remortgage but other reasons for doing so include releasing the equity that is tied up in a property or using the extra wealth generated to consolidate debts – whether these be business or personal.
For homeowners who are really dedicated to cutting their monthly mortgage payments, it is possible to negotiate a remortgage ahead of the current loan's end. There may be extra costs associated with this, however, due to the fact that the current lender may well impose a penalty charge for ending the deal early. Furthermore, the borrower will almost certainly have to pay for another home survey before they can take out a remortgage.

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