A remortgage replaces a current mortgage loan with a new loan that has a better interest rate or terms and conditions. The lender of the new loan repays the previous mortgage debt. The borrower then has just one mortgage to pay that will now be payable to the new lender.
Many times the terms ‘remortgage’ and ‘refinance’ are confused. While they are both somewhat similar, there is one big difference between the two. A bad credit remortgage is accepting a new mortgage loan from a new lender and a refinance loan can be from the existing lender or a new provider.
Benefits of a remortgage
- Maximizes savings. You are able to save a lot of cash by accepting remortgaging when interest rates are lower than what your current mortgage has been
- Reduces monthly payments. The monthly payment on the loan will be lower because the loan period will be extended. The loan will be new but with possilby a different interest rate and different terms.
- Consolidating debts into one. You can combine high interest debts into one mortgage loan. This reduces your monthly payment total for all of your debts.
- Having extra cash. The amount of money that is provided with an adverse credit remortgage releases the home’s equity. With this extra money, you will be able to make needed purchases or repairs.
Borrowers of a mortgage consider remortgaging for many different reasons with the most popular being the amount of money saved. A new mortgage will have a lower interest rate than the previous loan did and may have lower monthly payments. A lower interest rate may also lower the total amount the borrower must pay over the loan’s lifetime.
The term ‘equity’ means the difference between the amount that is still owed on a mortgage loan and the market value of the home. This equity can be released to the borrower with a remortgage loan. As a borrower continues to pay on the mortgage, the equity continues to increase. The borrower is able to obtain the equity when remortgaging and may borrow whatever amount exceeds the current debt.
Completing a fixed remortgage is pretty easy; the entire process is similar to that of any other mortgage loan. The lender of the loan reviews the application of the borrower as well as any related paperwork that is needed. This usually includes debts, income and expenditures. A home evaluation is usually required. Sometimes, this is less intensive thant what was performed on the initial home loan. A surveyor may just view the home from the outside and ask a few questions. There are other times when a lengthier evaluation is needed.
There are some particular fees applied in a consolidation remortgage and that are quite similar to those of when buying a property. Many times, borrowers have to pay for the evaluation and legal fees. There aer many lenders who charge a loan-processing fee. The amounts charged may vary from one lender to another.
1. Stamp duty. Includes 1% of the purchase price which will be remortgaged. This price may not exceed 60,000 but for those costing more than 250,000, the charges will increase.
2. Mortgage Indemnity Guarantee. This is an insurance policy where the borrower has to pay a premium to protect the lender in case of default on the mortgage. This is required when a deposit of 10% or less in made.
3. Other costs include of a fixed rate remortgage may include:
Early repayment charges
Booking and broker fees
Lender’s arrangement fees
Higher lender charges
Discharge fees from a previous lender
Usually, a online remortgage can be completed within four to six weeks. The length will depend on the lender of the mortgage loan and any particular circumstances that are surrounding the piece of property being remortgaged. There are some lenders today who specialize in fast remortgages and guarantee to finish the entire process within just one week.