A remortgage is the process of replacing a current mortgage loan with a loan that has a better interest rate or terms and conditions. The new loan’s lender pays off the debt of the previous mortgage. The borrower of the mortgage loan has only one mortgage with the lender, which can either be the same lender or a different one. The reduction of the monthly mortgage payment is the biggest reason as to why people apply for a remortgage loan. Many people mistakenly believe that a remortgage is refinancing but it is actually an entirely new loan with new terms.
There are many reason why a borrower opts for a remortgage. One may be to get the equity out of the home in cash. If using the equity in the home, then an amount can be borrowed that is more than the present payment remaining and be used for any reason after the mortgage debt is paid off. This is only recommended if the property value has increased and there is a large amount of equity built up in the home.
Remortgage benefits include:
- Maximizes savings. A borrower is able to save a lot of money with a remortgage when interest rates are less than what the current mortgage carries.
- Monthly payments are reduced. The payment will be lower because the period of the loan is longer with the different terms and the same interest rate.
- Consolidation of debts. High interest debts can be combined into one loan. This lowers the monthly payment total for all of the debts.
- Extra cash on hand. The money that is provided in a remortgage allows the home’s equity to be accessed. This money can be used for anything from purchases to repairs.
Other benefits include the ability to make remortgage loans more flexible, shortening the time period of the loan, and repairing bad credit.
Completing a remortgage is simple and is very similar to any other mortgage loan. The lender will review the application as well as any other paperwork that is needed. This typically includes income, debts and expenditures and many times a home evaluation. Often, the home evaluation is less intensive than what was initially performed for the original home loan. A surveyor may simply view the home and ask some questions. There may be times when a more in-depth evaluation is needed.
A remortgage is not an expensive process. Many mortgage lenders today provide specialty services and sometimes there are not fees or costs. In the United States, the government is working together with lenders to refinance loans as well as prevent foreclosures in a time of economic crisis.
The best remortgage deal can sometimes be a difficult task, particularly with the many vendors that are fighting for business. It takes a great amount of research and time to find the best loan for your home. However, it you do take time to properly research, you will be able to find the loan that is best suited for you.
When searching for a remortgage, it is very important to look at the interest rates, repayment terms and monthly payments. Each of these need to be better than the current mortgage loan. Examining these will ensure that the payments are less over the entire loan. The interest rate will be key when it comes to the best mortgage deal. The more equity that is built up in the home, the higher the possibility is of having a lower rate.
A borrower looking to remortgage can contact his or her current lender or may also apply with alternative lenders. Help can also be found with a broker or financial advisor. They work with hundreds of applications for remortgages every month and will be able to find the best deal and provider for a borrower.
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