What Is A Remortgage?

Why look at remortgaging? It is a way of either getting a new rate with your existing provider or looking for a better rate with a new lender depending on who is offering the best remortgage deals in the market at that time. It will allow to you capital raise on a new rate either with your existing lender or the new one, subject to lending criteria.

There is some general confusion surrounding Remortgages and it's relation to Secure Loans, as a part from being a type of secure loan, Remortgages can also be used to do or buy most things. However there are a couple of vital differences between the two terms; remortgages can be obtained for any sum of money you require whereas secured loans generally have restrictions of between £25,000 to £100,000. Also, unsecured loans do not change anything about the currently obtained regulated mortgage.

When looking to remortgage you will have various types of products that you can select from, the first one we are going to look at is the fixed rate mortgage, this will allow you to budget for a set period in time i.e. normally between 2-5 years, the payment to the mortgage lender will never increase during this set period.

Those people who like to have a product that has low interest rates will most probably plumb for the tracker rate remortgage, this product will track The Bank of England base rate, if interest rates increase so will your mortgage payment to the lender, where as an offset tracker remortgage will link your current account with your mortgage account, instead of receiving interest on your current account this will reduce your mortgage account balance. This product is extremely popular with higher rate tax payers.

There are multiple other forms also including Variable Rate Remortgages and Buy-to-Let Remortgages. With such a diverse choice of Remortgaging options, it is strongly recommended that you obtain advice in regards to which deal is the best for your circumstances and will also hold the best rates.

The housing market has been hit the hardest, banks have had to have help from the Government as they became increasingly insolvent, without the government and the taxpayers help these banks would have gone into liquidation. This credit crunch has not only hit the UK, this is a worldwide recession, the Council of Mortgage Lenders has said that only 25,000 remortgage's actually completed in August 2009, that was down 13% on July's figures and 19% down on the year earlier, this has put great pressure on homeowners as capital within the housing market has nearly dried up due to the capital restrictions on the mortgage lenders.

In October 2010 the banks started showing signs of recovery within the remortgage sector, loans had jumped a massive 35% in September 2010 and as a result the Remortgage market is becoming one of the most competitive markets with banks and building societies reducing interest rates to try and draw in the consumers.

When looking at remortgaging there can be some great benefits, you could look at releasing equity to help your children through university, raising capital to pay off some of those highly charged credit cards, even personal loans and hire purchase agreements you have. We would always suggest that you seek advice before exploring this avenue as you are actually adding debt to yourselves over a longer period of time.

There are however some problems/disadvantages and complexities surrounding Remortgages. For example, following the credit crunch, lenders have become increasingly stricter regarding who they lend to and how much they lend. For this reason, lenders may be reluctant to lend if your employment has recently changed and your future income is somewhat uncertain, for example if you have recently become self employed. Similarly, if it hasn't been that long since you obtained your original mortgage and got it at a discounted rate you may face substantial penalties for early repayment.

When discussing a remortgage, whether it be through your local bank, an IFA or a whole of market mortgage broker, there are various steps involved, you would have done most of these when your originally bought your property. An application needs to be completed with one of the above, this will take time and effort on your behalf, property needs to be valued, lender will require conveyance work to be undertaken, this will be done by either your own solicitor or one given to you by the lender, previous lender will be paid in full and any other monies due to you will be released to you once account has been settled. The cost of remortgaging can vary dramatically, so get searching for the best remortgage deals.

About the Author

Tim writes for Just Remortgages who specialise in finding the best remortgage deals for all their customers, as well as providing news and information on the latest remortgage rates available in the market.

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