Most people tend to avoid remortgage deals because they lack the details and explanations needed to make an informed decision. Everyone knows that this is an option if the mortgage becomes too expensive; however, the average homeowner will prefer to get a personal loan and use it to make the payments rather than go to the lender and ask for another deal. Unfortunately, getting a personal loan in order to pay a mortgage is usually the more expensive options, and many people end up losing money,
This having been said, remortgaging a property is not difficult to understand or to do and, in most cases, it can save you a lot of trouble and relieve some of the stress put on your finances. Here is what you need to know about this type of deal and how you can get it:
What does it mean to remortgage a property?
Remortgage deals are designed to help those who are either displeased with their current mortgage deal or have had their income reduced and are unable to make the payments in full. In many ways, remortgaging a property is the same as refinancing a loan. If you consider that the deal that you’ve got isn’t working for you anymore, it is possible to get a new one. However, a new deal may also imply new charges that you have to pay or deposits that you need to make.
There are several types of mortgages, and each one will cater to the needs of different types of individuals. Here are some options that you be able to choose from:
- Variable-rate mortgage – What you pay each month will change, depending on the rate established by the lender. In some cases, it may be lower than what you pay with a fixed-rate deal; however, this can quickly change and the monthly payments may grow. Most lenders automatically move homeowners to a variable-rate mortgage when their current deal ends;
- Fixed-rate mortgage – As the name implies, fixed-rate mortgages come with fixed interest rates. In other words, you will have to pay the same amount of money each month, regardless of how the economy changes;
- Tracker rate mortgage – Tracker rate deals are basically variable-rate mortgages; however, the interest rate depends solely on the base rate of the Bank of England’s borrowing rate. These offer more transparency than variable-rate mortgages, but they can still become expensive during times of financial crisis;
What you need to look out for?
Every remortgage deal has different terms and conditions that you will have to look out for. If you are no longer happy with the deal that you’ve currently got and want a new one, call your current lender and ask if you can switch to a better rate. Do not forget also to ask if there are any exit fees that you will have to pay.
Depending on the reason for which you want to switch, and on your current financial situation, you will have to make a choice:
- Get a fixed-rate deal and pay the same amount of money each month – This mortgage is extremely useful if you sense that a nation-wide financial crisis is coming because it will keep your interest rate from growing;
- Get a variable-rate mortgage and pay less interest in some situations – In some cases, a variable-rate mortgage can be considerably cheaper than a fixed-rate one. However, this depends on how well you can detect future changes in the economy;
There are also other terms that you need to factor in, such as the ability to make extra payments. Some lenders will charge you for extra payments, or won’t accept them at all. You will also have to look at the early repayment fee.
Generally speaking, lenders usually offer fee-free deals. However, some will have you pay legal, valuation, and administration fees. Make sure you ask what charges you have to pay beforehand. Remortgaging a property requires a lot of planning. Look at your current financial situation and estimate what your income will be in the coming years. Next, shop around and find a mortgage that suits your needs and ask for information about the fees that you will have to pay.
Go through these steps and take into consideration everything that we’ve included above and you will make the right decision.