There are things that you will have to obtain through a loan or else you will never have them like a house. Given the general expenses of buying and moving into a residential property plus its necessity, it is not surprising that many people worldwide are involved in paying off mortgages. Even amidst the pandemic, a rise in the application for housing loans has still been seen.
The longer the duration of the loan is, the more burdensome it could become to your finances as the years go by. With this concern in mind, should you remortgage? How does it work? Many people are looking into this option since it will let them significantly lower the monthly repayments and even get some extra cash.
Despite having been practiced for several years now, many people are still confused about remortgaging. Below are some key takeaways:
- In this type of loan, you obtain a new mortgage from a different lender using your existing house as the collateral.
- The money you obtain from the remortgage may be enough to settle the remaining balance in your existing mortgage and at the same time raise money to use on other stuff like renovating the home. It could serve both purposes, using whatever the remainder of the money after paying the debt for your other plans.
- It is not called a remortgage when you apply for a different loan from the same lender. You are simply switching products that way.
- You can save on your monthly repayment since remortgage will allow you to reduce the rate.
There are technicalities involved here so most experts would suggest seeking the counsel of a professional financial adviser before deciding to apply for a remortgage.
Is Remortgage for You?
A remortgage is still a debt that you will have to pay off within an agreed time so you need to be smart about this decision. This strategy is for you if…
- Your introductory period is done and are now paying the standard variable rate that is significantly higher.
- You can no longer afford the monthly mortgage repayments.
- The term is just too long for you that you would like to finish off all the mortgage repayments sooner than what was originally agreed upon.
- An important project needs to be financed but you do not have other belongings to use as collateral if you apply for a loan.
- You wish for your finances to get restructured in a way that will unload some burden on your monthly budget.
Should you remortgage? You will say yes if you look at its advantages.
- You can pay off your loan sooner. This will be a big relief to you.
- The monthly interest rate will be a lot bearable to pay off with the restructuring that the mortgage affords you.
- You can have capital on a project or improve your house which will increase the property’s value during its resale.
- Your finances can adapt to the new repayment scheme, especially if your income has been reduced.
Getting Ready For Application
Listed below are things you have to perform in preparation for a remortgage application.
- Determine your purpose and its necessity. Discuss this with your financial adviser and explore your options. See to it that this will be a favorable step.
- Settle as much credit as you can and ensure that your credit score information is accurate. Your remortgage application will have better chances of approval if your credit score is good. You can also qualify for a bigger loan amount.
- Calculate not only the amount that you can receive but also the interest rate it entails. You need to determine that both are reasonable and that you will indeed afford the monthly repayment dues.
- Look for a reliable lender, one that will also look out for your welfare. Compare one remortgage deal with another to ensure that you will opt for the best offering.
- Make sure that all the needed papers are set. This will include proof of the source of income and other documents regarding your existing credit obligations.
Remortgage: Understanding the Process
Here is what will happen during the remortgage application.
- Obtain an Agreement in Principle or AiP. This is how you know the amount that will be loaned to you. This can be gotten online in most loan providers and going a thorough credit check is not needed. Although this will not assure the approval of the remortgage application, an AiP provides you with a better understanding of what your options are.
- Determine other fees that may have to be settled during the switching of a mortgage like a prepayment penalty, exit, valuation, booking, or solicitor’s fee. There are lenders that no longer charge a few or all of these fees to you.
- With your AiP and necessary documents on hand, submit your remortgage application. Disclosing other personal and financial details may also be required.
- The loan provider will screen the papers, perform a credit checkup, and determine how much your property values.
- Once the remortgage is accepted by the lender, the switch of the mortgage from the old lender to the new one will be processed by the conveyancer or solicitor. This may be a free or paid service.
We hope this guide answers your questions like “Should I remortgage?” or “How does it work?” and leads you to the solution that will favor your current mortgage situation. For more information about remortgaging, I advise you to visit mortgage.gb.net. They provide professional advice on mortgages and remortgages.