To remortgage or not to remortgage

When your mortgage deal comes to an end, you may want to shop around for a new product. This is known as a remortgage.

In these hard times do you remortgage to get a better rate or do nothing and stay with your current lender after the end of a fixed term interest rate on your mortgage, say two or three years, will mean that you revert to the standard variable rate is a question you need to ask yourself.

If the variable rate is relatively attractive, which is it at the moment you may not want to bother remortgaging. And if you have not built up much equity in your property, you may not be able to remortgage, as many lenders now insist on a minimum of 20 to 25%. But if you have a lot of equity in your property, you may well be able to remortgage onto a more attractive interest rate which could be better than the standard variable rate.

What if you have to remortgage to move house. In such a situation, even if your lender will allow you to transfer your home loan in theory, it will probably require a valuation of the property to ensure it meets its standards, with property prices falling so much in the past year, you could be hopeful.

Remortgaging needn't only occur when your mortgage interest rate comes to an end. Some people take out a new mortgage simply to save money on their monthly repayments. For example, you may take out a fixed rate mortgage only for the interest rate to plummet, leaving you stranded on a higher rate. Remortgaging to a more competitive rate in these circumstances may make financial sense. Bear in mind that remortgaging is not a cost-free process though. Your current mortgage may carry penalties or charges if you try to leave it early, plus there will probably be costs associated with the new deal, so factor all of this into your decision.

In the current economic climate with slowing house prices and lenders now charging higher interest rates, a remortgage should really be driven by need to do so. As a result of the credit crunch, a number of lenders pulled their larger loan-to-value (LTV - the amount lent as a percentage of the property's value) mortgages in spring 2008. All 125% mortgages were abolished, meaning that borrowers could no longer obtain loans for more than the property's worth. Although this wasn't good news for first-time buyers, it also reduced the chances of borrowers that were already on such deals would be able to get similar percentage loans when they came to remortgage. You may find that you need to build up more equity in your property before you can remortgage as most lenders will only offer a LTV of 80% to 85% at the moment for a better deal.

Lenders are being tighter with who they lend to and how much they lend given the current economic situation, so if you bagged yourself a good mortgage deal a couple of years ago, don't necessarily expect a similar rate this time round.

To summarize, to remortgage or not to remortgage, in my opinion as the author of this article I believe if you have enough equity in your property around 40% then there are many good deals to be had, but if you are like the majority who do not have enough equity in their property then the best route is to stay on the standard variable rate and benefit from low monthly mortgage payments until rates start to rise which is a question we are all asking.


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Lee: ‘We’re mortgaging the future’

U.S. Congressman Chris Lee wants his constituents to know he’s read the 1,100 pages of the current health care reform bill — and his objections to it are based on research and business experience.“One thing I have done is do my homework,” he told local officials and business leaders at the Livingston County Chamber of Commerce Friday. “I’m a big believer in the fact that it’s easy to say “no” to something, but it’s more important to have answers and solutions to how to reform the system without burdening small business owners.”Lee worries that government isn’t up to the task of managing a complex health insurance system. Private industry, with its drive to control costs and seek efficiencies, will always do a better job, he believes. “The U.S. spends two times per capita what other countries spend on health care. I look at this as an opportunity to cut out lots of waste, fraud and abuse.”Lee sees health care reform as a way to help make American businesses more competitive in the global market. Efficiencies in health insurance will ultimately result in more jobs and lower prices on exports.“I should be voted out of office if we can’t get real reform done.”In the 1,100 pages of the current health care reform bill, known as H.R. 3,200, there is “not a single paragraph” addressing doctors who practice defensive medicine, Lee points out. The American Medical Association estimates unnecessary tests and treatments prescribed to avoid medical malpractice lawsuits cost consumers between $84 and $151 billion a year. Among other measures, the AMA supports a $250,000 cap on non-medical damages.Why doesn’t the bill address liability reform? “The current administration accepted $80 million in contributions from the personal injury lobby in 2008,” Lee claims.The Congressman also questions the number of uninsured — 47 million — that Democratic leaders claim are uninsured. He says 10 million are illegal immigrants who should not qualify for benefits. Several million more are recent college graduates and other young adults. Lee believes those young adults could have access to health care if insurance companies offer riders to keep them on their parent’s health plans until they’re 26 years old.Lee has sponsored an alternative House bill called the Medical Rights and Reform Act which includes provisions to improve information technology systems, offer incentives to states that reform insurance markets and extend flexibility and control to lower income families.He also supports allowing insurance companies to cross state lines and for companies which operate in several states to pool their employees into a single plan in order to save money.“I want to take real dollars out of the system instead of just sharing costs,” he said, pointing out that the current reform plan is like a “shell game,” where public insurance beneficiaries will be subsidized by private insurance companies. Present public health care systems like Medicare and Medicaid keep costs down for their members, but those costs get passed on to other patients. A public health care plan would only pass those costs on to taxpayers, he contends.As an example of government waste, Lee described H.R. 1018, the “Restore Our American Mustangs Act” which would create 19 million additional acres above an existing 30 million acres set aside on federal land for free-ranging wild mustangs and burros. The $700 billion bill would also include a horse census and birth control programs.“I tell my Democratic colleagues, ‘We’re mortgaging the future of this country. Please stop.”During his visit Friday, Lee also visited with physicians and staff at Tri-County Medicine in Geneseo, appeared on WYSL’s Bill Nojay Show and toured the Lakeville Grain Elevator.


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Have you been tempted to remortgage yet?

For many, remortgaging had become as much a part of their regular financial review as filling in the insurance forms.
But the credit crunch put paid to all that with banks trying to navigate away from the heavily indebted consumer in a bid to rebuild their own credit worthiness.
While some state owned banks are under pressure to lend more, with interest rates falling many people now seem happy to stick with their SVR after they come of their discount period.
Remortgaging was never free, was often time consuming, and lenders are still reluctant to lend at high loan to value rates.
Coupled with falling house prices, this has closed the door on anyone hoping to secure more credit against the value of their home.
HSBC though has launched a new offer at a record low rate in a bid to lure out any potential remortgagers (see our earlier story here). As long as they have a 40% deposit, that is.
With a deal so low that it should more than make up for costs associated with remortgaging – although there is the minor issue of a £1200 fee – the bank is clearly hoping to breathe new life into the remortgage market.
The lenders say the main reasons lending levels are so low is that there is little demand. But I think the true picture may be a little bit more complicated than that.
I did recently think about remortgaging. I have a little pot of money in a bank account with an introductory bonus period that is about to expire.
With saving rates now so low I thought I'd do the sensible thing and pay it into my mortgage. I thought it might be a good idea to reduce the term of my mortgage by a few years while I'm at it.
In theory at least I meet the lenders’ requirements even in this difficult market - with enough equity to secure a 70% loan to value deal.
To my surprise the application was refused on the basis of a rather measly valuation; something that apparently you cannot appeal.
Reading the personal finance pages it seems I'm not alone and others are also being refused mortgages.
Are you one of them? Or are you one of the people happy to just keep paying the current rate?
Are you looking around again as rates are starting to tick lower?
Or were you one of those people that rushed to lock yourself into a fixed rate earlier this year?
Did the application go as smoothly as previous applications?


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Remortgaging to give my furry friend a chance

T was probably diabetes, serious but not life-threatening, the vet said as he handed my wee dog Jessie back into my arms. She had been sedated for tests. There was definitely something wrong with her. She had been drinking what seemed like gallons of water and peeing in the house.
Every time she did it, she looked sorry, her eyes wide with worry.

I knew by then that she couldn't help it, so there was no point in scolding her.

In the eight years since we had been together, she had barely put a paw wrong.

Jessie the west highland white terrier was the first dog I had owned as an adult and I loved her so much I also bought her a sister, Bonnie, to keep her company.

You never have a bad day when you live with a dog – or rather if you have the worst day in the world (Shock. Husband has girlfriend. But there's more. Shock, horror. Girlfriend is pregnant.) they always make it better. The husband was the loser.

Cheeky, intuitive, loyal. Their love is unconditional. Whatever happens in your day, they welcome you home with unsuppressed excitement.

Like my parent's westie, who lived for 18 years, I expected Jessie to live forever paid the vet's bill and he sent me off to see a specialist for more tests. Just in case.
Jessie was losing more weight but she could still wag her tail like a trouper.

The specialist also thought it was diabetes but suggested an ultrasound ($280), radiographs ($255) and a body function test ($165). More tests than any human in my family had ever had. Certainly more expensive.

He walked back into the consulting room with wee Jessie, groggy from drugs and with her fur shaved on one side. She had cancer, a tumour on one kidney.

It is rare in dogs but it could be worse, he said. Dogs can live long and happy lives with one kidney. He said they could operate and remove the cancerous kidney.

I didn't need to consider it. I booked her in for an operation and didn't even ask how much it would cost, didn't even care.

I paid the bill of $1117.05 and went home to wait. Four days later we went back.

I can still see Jessie's look as she turned her head and gazed after me over the vet nurse's shoulder as she was carried into the surgery area. Dogs are more intuitive than humans. She knew more than I did.

I left her in the care of the experts along with a $2000 deposit. They gave me a Take Home Information Sheet. That was a hopeful sign. She had her operation the next day and everything looked good.

The receptionist was very helpful. Of course I could talk to the surgeon, she said. They encouraged people to talk to them about their patients. But he never returned my calls.

Then Jessie died. Of course it wasn't as sudden as that. But as her condition deteriorated, no one said she would die.

You might think I would have worked it out for myself but I trusted the experts.

Two days after the operation I got onto the surgeon. I made notes as we spoke and have kept them. The cancer may have spread to her brain, he told me. She'd had a seizure – but I knew that, didn't I, he said. I think I would have remembered if I had been told.

The surgeon was totally offhand. Obviously he preferred dealing with unconscious animals than people who can talk back. I wanted people to know who he was but the lawyers would only have taken his name out.

It was touch and go for another two days. I hoped for a miracle. There wasn't one. The nurses called me in the middle of the night and by the time I got there Jessie had died.

I hugged her body, which was still warm. Four days' treatment cost me $11,767.60. Yes, it was a fortune. I had to remortgage the house.

I would have been happier if it had saved Jessie's life but I don't begrudge one cent of that money. I had to give her the best chance that I could while the vets were saying that she may have survived.

I cried for weeks. I report on horrific crime and do not cry. But I still cry as I write this. I'm not crying about the cost but, as time has passed, I have become increasingly bitter that perhaps the vet hospital strung me along to make money.

I like to think I was not keeping her alive for myself. If any of the vets had said there was no chance, that my dog was in pain and the best thing for her was to have her put down, I would have done it.

The only thing to do was get another westie to keep Bonnie company, wee Hinnie – a Geordie term of endearment, and she is living up to her name.

Folks who don't have dogs think we are completely mad. It's a shame as they don't know what they are missing.

Would I do it all again if my other two dogs became as ill? You bet. I would do anything to save their lives.

But this time I have pet insurance. All it will cost me is the $100 excess. And I would find a different surgeon, one who didn't bark and had a bedside manner.


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Cruel conman jailed for tricking consultant out of £350K

IT WAS an e-mail that was too good to be true.

For anyone willing to help a Nigerian transfer $300 million into a UK bank account they would receive up to half of the fortune.

But for leading consultant surgeon Fawzia Ashkanani the temptation was irresistible.

The breast cancer specialist remortgaged her house and borrowed thousands of pounds from friends and family to invest more than £350,000 in the get rich quick scheme which turned out to be an internet scam.

Nigerian conman Chinaenye Mokelu, 44, was jailed for five years for his part in the phishing spam e-mail which was said to have “ruined” the consultant’s life.

Describing the impact of the fraud on the surgeon at Dumfries Infirmary, Michael Fraser, prosecuting, told Basildon Crown Court: “She said how this whole episode has left her feeling upset with a huge feeling of guilt because she has let down members of her family and indeed close friends.

“She is struggling to cope with repaying the £210,000 remortgage.

“It has also had a profound psychological impact on her. She has considerable difficulty in relating and talking to her patients because this matter has caused her considerable embarrassment.”

The court was told “gullible” Miss Ashkanani saw the opportunity, presented when the e-mail landed in her inbox in August 2007, as a way to finance her dream of setting up clinics in the most deprived areas of Africa.

Mr Fraser said after making contact with the sender, she was asked to pay £4,500 to broker Mokelu, to enable the transfer of funds.

As part of the elaborate fraud, Kuwati-born Miss Ashkanani travelled twice to London to meet several of the gang of fraudsters – who have never been traced by police.

During one meeting in a Holiday Inn she was shown a suitcase full of fake $100 notes. In September 2007, Miss Ashkanani was told the sum of £210,000 was required to release the funds.

So desperate was she to get hold of the promised £75,000,000 reward she raised the amount by remortgaging her house.

The conmen even mocked up and dispatched a document which appeared to be a £150,000 transfer to her account purporting to be from US Citibank Group.

Then came a phone call demanding £750,000 in tax. When Miss Ashkanani said she could not find that amount, the court heard, she was told “raise as much as you can” and threatened with police investigation if she pulled out of the deal.

She convinced her brother to lend her more than £50,000 which was paid into a Lloyds bank account controlled by Mokelu.

The married father-of-two – whose wife and seven and 14-year-old daughters have returned to Nigeria – was arrested as he withdrew £20,000 in cash from the fraudulent account. When police searched his home in Grays, Essex, they found a suitcase full of fake cash and a counterfeit Nigerian passport.

They also found a mobile phone with Miss Ashkanani’s work, home and mobile numbers saved under the names “Miracle 1, Miracle 2 and Miracle 3”, the court was told.

During some 18 months, Miss Ashkanani handed over £352,937.

Mokelu was sentenced to a five-year jail term – four years for conspiracy to defraud and another year added on for using a fake Nigerian passport to set up a fraudulent bank account.

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New buyer mortgage deals 'creep up' as remortgaging drops

May data from the Bank of England confirm the trend lenders have been seeing.

With standard variable rates so low, home owners are happier to stick there, rather than remortgage onto high fixed rates – despite warnings that the moment the Bank of England increases rates variable rate deals will jump, as will fixes.

Fixed-rate mortgage deals have already started to rise.

Falling house prices putting some homeowners in negative equity or leaving them with very little equity is also creating a brake on remortgaging.

Last week rating agency Fitch warned 35 per cent of borrowers do not have enough equity to secure a remortgage.

In May there were 30,984 remortgage deals – 9.8 per cent down on the six-month average.

Andrew Montlake, at mortgage broker Coreco, said: "I am concerned that the number of remortgages has fallen. Fixed rates are rising and anyone settling for short term gain on a lender's SVR could be in for some long-term pain.

"People wanting to have their cake and eat it could fix part of their mortgage and leave the rest on a tracker, which will at least give some level of security without substantially upping their current payments."

The number of house purchase deals stood at 43,414 – up 21.7 per cent on the six-month average.

However, high deposits needed to make a purchase are still holding back many first-time buyers from taking advantage of low house prices.

The mortgage market as a whole, however, remains anaemic, with lending growth dropping from over ten per cent two years ago to 1.4 per cent now.

Mr Montlake added: "Slowly but surely, the number of new home loans being approved is creeping upwards, reflecting the growing confidence in the UK property market.

"Some people were expecting better figures but let's not kid ourselves, it's still very difficult to secure mortgage finance at higher LTVs."


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What To Expect With An Offset Remortgage

Like other offset mortgages, the offset remortgage is much in demand, as UK home buyers wake up to the benefits of flexibility. The best offset remortgage deals have all the flexible features of other offset deals, with a couple of added incentives for remortgage customers. With flexible remortgages, home buyers can expect to save on a couple of fees that other home buyers might have to pay. These include legal fees and valuation fees, for example. Some offset remortgage lenders also wave arrangement fees and many may offer insurance products as added incentives for flexible remortgage customers.

An offset remortgage will also usually be portable, which means that if buyers move to another property they can move the mortgage without incurring additional mortgage fees. And an offset remortgage will also allow borrowers to overpay, either by paying in a lump sum to the mortgage account or by making a regular overpayment. Offset remortgage customers should also look out for underpayments, as this might be a useful feature if circumstances change. However underpayments and payment holidays could increase the mortgage term and/or the total amount payable.

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The Importance Of Remortgaging

I personally believe that the quality and suitability of a homeowner’s mortgage is the second biggest factor that will ultimately determine the success of a property investment, especially with buy to let investors; the biggest factor being the market condition. However, you alone can’t control the market condition, but you alone can play a key role in determing the fate of your mortgage.

A mortgage is probably going to be the biggest financial responsibility you will take on, so it is a big deal. Forget your lousy electricity and water bills- you will still have a home even if failing to pay those. The majority of people will be at their mortgage lender’s mercy for 25years or there about; that’s a long time to be on your knees and it’s certainly not an enjoyable position to be in (some may protest to that claim).

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Enquire into a remortgage by visiting our mortgage centre

Remortgaging has become a popular way for many consumers in the UK to enjoy the benefits of getting rid of a poor value mortgage and switching to mortgage that offers better value for money and huge savings over the term of the loan.

When interest rates start to rise remortgaging becomes even popular, with many consumers looking for different ways to try and cut back on repayments and to save money on the interest that they have to pay on their mortgage loan.

The interest rates charged on mortgages can vary from one lender to another, and therefore you may find that you can get a far better deal on your mortgage by switching to a different lender. There are also those that decide to remortgage in order to switch to a different type of products – for instance, switching from a variable rate mortgage to a fixed rate mortgage to help stabilise repayments and make financial management easier.

Many homeowners have made huge savings on their mortgage repayments by remortgaging, and the world of remortgages has become big business in the UK over recent years. The mortgage market is a highly competitive one, and you will find that if you have good credit all lenders will be vying for your business.

In order to try and attract more custom and stay a step ahead of the competition, lenders will strive to offer better deals than their competitors. This is where homeowners can really cash in, by switching to a mortgage where they are charged less interest. Even an interest rate that is around 1% less than you are currently paying could save you thousands of pounds over the term of your mortgage.

For those that want to switch to a different type of mortgage product, remortgaging is also ideal. If you are currently on a variable rate mortgage you may have found that rising interest rates are causing severe financial difficulties, and making it difficult to budget.

With a fixed rate mortgage you can enjoy the same repayments each month because the interest rate will remain the same no matter what happens with the Bank of England base rate, so you won’t have to worry about fluctuation and won’t have to concern yourself with making changes to your budget every time the interest rate changes.

Remortgaging has become a far simpler process these days, and it is far faster and easier than it used to be. However, there are some things to look out for, namely in the way of fees.

You may find that you are charged an exit fee by your existing mortgage provider for closing your mortgage account, and you may also find that you are charged set up fees by your new mortgage provider, all of which can add up to a considerable amount. On top of this you may have to deal with solicitor costs and even valuation fees, even though you are actually purchasing a new property.

When you take all of this into consideration you have to think carefully as to whether it is worth actually switching your mortgage or whether you will be better off sticking with your existing one.

In some cases you may find a lender that offers to pay the legal fees and valuation fee when you switch your mortgage, and if this is the case then you may find that remortgaging is more viable. It is important to weight up the costs of remortgaging as you could otherwise be putting yourself through a lot of hassle only to find that you are actually no better off in the long run.

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Remortgaging in the current climate

Many people will find that they need to seek professional mortgage advice in order to obtain a remortgage. This may not have been the case five or so years ago when mortgages were easier to obtain as more money was available from the banks and building societies. These days, due to what is known as the ‘credit crunch’, there are less mortgages around resulting in mortgage advice becoming more valuable than ever before.

The on-line encyclopedia Wikipedia explains a credit crunch as follows. ... “There are a number of reasons why banks may suddenly increase the costs of borrowing or make borrowing more difficult. This may be due to an anticipated decline in value of the collateral used by the banks when issuing loans, or even an increased perception of risk regarding the solvency of other banks within the banking system. It may be due to a change in monetary conditions (for example, where the central bank suddenly and unexpectedly raises interest rates or reserve requirements) .....

Currently the UK is experiencing all of the above. It may well be that the on-going credit crunch may force the UK into a recession. Many economic pundits are attempting to predict when and if this will happen, but all concur that unless the oil price moderates, the Bank of England cuts rates, or the interest rate banks charge each other to borrow large amounts of money from each other comes down, we will be in technical recession by the end of 2009 or earlier.

According to Peter McGahan, managing director at Worldwide Financial Planning.........

“There are many people who are keen to remortgage now who are finding that they cannot, due to the above problems. For them it’s a difficult situation in that they are now susceptible to their existing lenders’ uncompetitive rates.

Those facing the biggest difficulties will be those coming off a two-year fixed rate (which were priced competitively at the time), or those who took out a mortgage with a high loan to value ratio. These groups may find it tricky to remortgage, along with those who need to borrow at high income multiples as lending criteria have tightened so much.

The most important thing is to remember that you are not alone. There are plenty of people who took out mortgages with a high loan to value ratio who will be less than pleased as house prices fall”.

Peter’s top 10 tips when remortgaging....

1. Until early 2008, anyone could arrange a mortgage, but today it’s the job of a professional who specialises in mortgages. Nationwide announced recently that they are now moving to quality rather than quantity in deciding which mortgage advisers they work with.
2. A specialist mortgage adviser will know exactly how to position your case with a lender and will invariably have extra clout because of their collective buying power.
3. Ensure that you look at any mortgage offered in its entirety. The interest rate is just one part of the deal as other add-on fees could prove expensive. They are often added onto the loan which is expensive when the interest is spread over the whole mortgage term.
4. Watch out for being tied into your mortgage beyond the normal term at a higher rate. It’s a common ploy that catches many people out.
5. Ask your mortgage adviser to negotiate with your existing lender. If a lender knows you might take your mortgage elsewhere they may agree better terms with you.
6. If you can’t afford your mortgage payments, act straight away and talk to a mortgage adviser or your mortgage lender. You may feel better for seeking advice.
7. Your lender or a mortgage adviser will be happy to help and will discuss all the options available. They have a requirement to treat you fairly, so give them a chance to do that.
8. If you have a repayment mortgage, look to switching onto a cheaper interest only mortgage to give you some space, then switch back. Seek advice before doing this as sometimes lenders will charge a fee to change the basis of the mortgage.
9. Do a budget planner. Stop unnecessary payments. Pay the important bills first, not those who shout loudest. The priority bills are those who can take legal action such as any loan secured against your house, rent, council tax, water, gas, electricity, unpaid fines, hire purchase, and of course your phone if you are reliant upon it.
10. If you find a good deal, act quickly, as rates are disappearing almost as fast as they appear.


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Ten things to know about remortgaging

WE all have our price. When it comes to remortgaging, what’s yours? Chances are the answer is savings of £93 a month. That is the trigger point at which borrowers take the trouble to find a better deal, according to research by Bradford & Bingley, the high street broker.

If you are ready to make a move, here are ten things that you need to know about remortgaging.

1. No excuse for apathy

Charcolonline, the mortgage website, says that more than half a million homeowners squander hundreds of pounds each year by not switching from their lender’s standard variable rate (SVR).
Background

* A basic guide to mortgages

* Ten things to know about remortgaging

* How to sell your home without an estate agent

* Ten things to know about equity release

* Ten ways to combat rising mortgage costs

2. Complacency costs

Drew Wotherspoon, PR manager for Charcolonline, says: “Some consumers are sitting on their hands when they could make great savings.”

For example, an interest-only, £100,000 loan on an SVR of 7 per cent costs £583 a month. A switch to a two-year fixed rate at 4.28 per cent would cost only £416 a month.

3. To fee or not to fee

Remortgaging can incur arrangement, valuation, legal and administration fees of up to £1,500, but there are deals that pay some of these costs for you.

4. Fees can cut costs

Few things in life are really free, and fee-free deals tend to carry rates that are up to a quarter of a percentage point higher than products where you pay the costs. The larger your loan, the more cost-effective it will be to secure the keenest rate and pay the fees.

5. Redemption penalties

These are charged when you desert a mortgage during any offer period, but some lenders charge beyond this. Penalties can cost thousands, so work out yours before switching.

6. Don’t fixate on base rate

Trying to second-guess the Monetary Policy Committee by waiting for rates to fall further before switching is not a good idea unless you are a confident economist (and plenty of these get it wrong).

7. What’s important?

Do you want the stability of knowing what your repayments will be by opting for a fixed rate? Would you be happier taking a chance that rates will remain stable or come down by selecting a mortgage that tracks the base rate? Mortgages that offer a discount on the base rate are usually cheaper than fixed-rate deals.

8. It’s no big deal

Remortgaging typically takes between four and six weeks. Mr Wotherspoon says: “There is the misconception that remortgaging takes up too much time and effort, but it is relatively painless for most people and should not take more than two hours of a borrower’s time.”

9. Advice on advisers

With thousands of mortgages available, asking an expert to find the most suitable one for you is a good idea. Some brokers charge up to 1.5 per cent, but you can receive independent guidance at no cost. London & Country, for example, offers a free telephone service with brokers paid commission by mortgage lenders.

10. Do you need the equity?

It can be tempting to cash in some of the equity in your home to pay for anything from home improvements to holidays. This is a cheap way to borrow, compared with credit cards and personal loans, but taking out a large chunk of cash and paying it back over the term of your mortgage means that you could still rack up a lot of interest.

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Refinancing for the Right Reasons

Deciding when or if to refinance your home depends primarily on your own unique financial situation. There really is no clear-cut rule for when or when not to do it. There are times when it makes economic sense to refinance. In order to ascertain what’s best for you, it’s important that you take stock of your own financial circumstances in relation to your financial objectives and goals.

One major consideration that you must be aware of is the length of time that you anticipate living in the home. Another factor to take into account is the direction that market rates are moving, both currently and in the near to intermediate future. Any decisions that you make concerning refinancing should rest largely upon careful deliberation of these and other issues.

One of the main reasons that people refinance their homes is to consolidate their high-interest credit card debt. Converting this taxable debt to tax-exempt mortgage debt can literally save thousands of dollars over the life of the loan. And mortgage interest rates are generally significantly lower than credit card and installment loan debt, so refinancing to pay off those high interest-rate loans only adds to your savings.

Lowering your monthly payments is another very popular reason for refinancing. For instance, an interest rate drop of only one-half to three-quarters of one percent can lower your monthly payment. However, the cost of obtaining the refinancing may nullify any savings that you could realize. This is when you need to be aware of how long you will continue living in the home. Since most families generally change dwellings every six- to nine years, the length of time you stay in the home after the refinance will determine if you’ll be able to recoup the costs of getting the new loan.

Changing the term of your mortgage can also lower your payment. Even with the same interest rate, going from a 15-year to a 30-year mortgage will significantly lower your monthly payments. However, the total amount that you’ll pay in additional interest over the life of the loan will be dramatically greater. But again, taking into consideration the length of time you’ll live in the house after refinancing, the lower payments may be worth your while.

Since the summer of 2004, the Federal Reserve has raised interest rates several times and most experts foresee that trend to continue. If you have an adjustable-rate mortgage (ARM), your interest rate may eventually adjust to a rate that’s higher than a fixed-rate mortgage. It may therefore be prudent to consider refinancing to a fixed-rate before that happens. Again, you’ll need to take into account the amount of time you’ll remain in the home. If you plan on moving within a few years, for example, it may not be cost-effective to refinance.

You can gain access to the equity in your home by opting for cash-out refinancing. The money can be used for higher education costs, home renovations, or any other financial needs that you may have.

In order to make the best decision for yourself and your family, it’s crucial to be aware of your financial situation as well as your short- and long-term financial goals. To get an idea of the potential financial impact of any refinancing, be sure to use our wide array of Mortgage Calculators. They’ll help to give you a clearer picture of the monetary implications of your decision before you commit to it. After all, the best decisions are based upon the most thorough information.

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5 Important Refinancing Points

When considering refinancing your mortgage, it literally pays to be smart. Clearly, the more information that you can gather concerning your options, the better position you’ll be in to make good financial decisions. Keep these points in mind when shopping for refinancing; they could very easily save you thousands.

* Remember, the lowest interest rate offered is not necessarily the best deal. Many lenders will offer a very low rate to get you in the door, only to charge you several points on top of the loan. A point is a fee equal to one percent of the loan. A one-point fee on a $150,000 loan would be equal to $1,500; a two-point fee would be $3,000.
* Remember, closing costs can vary with different lenders. Closing costs typically include things such as credit report fees, title company search and insurance fees, loan origination fees, appraisal fees and documentation fees among others. Lenders are bound by law to provide you with a Good Faith Estimate of closing costs within three days of taking your loan application. Your actual costs may vary slightly because the lender does not always know what the exact cost of a certain fee will be from a third-party provider. And different lenders themselves can charge different rates for their loan services. Also keep in mind that some lenders may advertise “no closing costs” on their refinance loans. The lender may pay the closing costs for you, and then recoup those fees (and then some) by charging you a higher interest rate on the loan.
* Remember, there may be other fees involved when you refinance. For example, some lenders may require that you keep an amount equal to 12 months of property tax in escrow. Others may require six months worth of funds to be held; other lenders might not require any escrow money at all. While you’re at it, ask if your homeowners insurance will be paid by you directly or if the lender will require an escrow account for that as well.
* Remember, an online bank might give you your best loan deal. Online banks may have lower overhead costs and more streamlined account and loan processes, and pass those savings on to their customers in the form of more attractive loan and earnings rates. Doing your research online can turn up some very competitive loan rates. But remember; check out any online bank that you are considering with the Federal Deposit Insurance Corporation (FDIC). This is actually a good idea to do for all banks that you have any dealings with.
* Remember, get everything in writing and pay attention to deadlines. For example, if you are quoted a specific interest rate, make sure that it’s given to you in writing. Be aware, however, that interest rates are only guaranteed, or locked in, for a short period of time, usually thirty days. If rates go up during that lock-in period you‘ll still keep your guaranteed rate. If rates go down during that time, most lenders will automatically give you the lower rate, although they are not legally obligated to do so.

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Remortgaging to free up cash

If the value of your home has risen significantly since you took out your mortgage – and, frankly, whose hasn’t over the past few years – you might be tempted to remortgage to free up some of that cash.

You could clear credit card or personal loan debts – or enjoy spending it on home improvements, a new car or a fabulous holiday.

With so many mortgage lenders competing for business, provided you’re up-to-date with your repayments and your financial situation hasn’t deteriorated markedly, you should have no difficulty finding one willing to offer you a larger loan.

Chances are you will even be able to get it at a lower interest rate than you are paying now.

If you have a particularly good deal with your existing lender, and it’s keen to keep your business, you might simply be able to increase your current loan, avoiding the hassle and cost of remortgaging.

But however you go about it, the end result is that you will owe more, so think very carefully before committing yourself.

To help you decide if it really is worth increasing your mortgage, read The dangers of remortgaging to free up cash.

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Why remortgage?

The simple reason is because it will save you an absolute fortune. Cutting 1% off a £100,000 mortgage will cut your costs by around £80 a month. Remortgaging is the biggest single money-saving activity possible, the financial equivalent of liposuction. Take the plunge and the pounds will slip off straight away.

The reason for a printed guide is because remortgaging is just too large a subject for an online version. It's something you need to sit down, read through and take some time over. After all a mortgage is likely to be your biggest single expense and therefore getting the remortgage right offers the biggest single savings.

Does the credit crunch change anything?

The guide was printed before the Credit CrunchThe Credit Crunch

This is the name given to the current phenomena that banks and other big financial institutions are struggling to find money to borrow. As they can’t find money to borrow they’ve less to lend out, which means the cost of debt is increasing, and its availability is decreasing. In other words it’s getting more difficult and more expensive to borrow.

Close , all the information in it holds true though. The main difference is that where once mortgage companies were fighting for business; now many don’t want it. It’s tougher to get a new mortgage deal and tougher still to get a very cheap one. This makes it even more important that you follow through the guide to understand how mortgage deals work before trying to find the right one for you.

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Q&A: Moving your mortgage

Thousands of people switch mortgage provider each year, some to save money, others as a means to borrow more cash.

What factors should you bear in mind when switching mortgage providers.

Can remortgaging really save money?

It depends.

It is estimated that more than half of all borrowers are continuing to pay over the odds for their mortgage each month.

Usually these people are paying the lender's standard variable mortgage rate. There will be lower rates available from other providers.

But this is not the whole story.

In recent years, banks and building societies have been hiking mortgage fees to subsidise attractive headline interest rates.

So called mortgage arrangement fees have sky-rocketed as have charges for redeeming a mortgage.

As a result, you have to do the sums to make sure that what you gain through switching provider - a lower rate of interest - is not lost through higher charges.

That sounds very complex, what help is available?

There are financial professionals who can advise you. Some of these are employed by lenders and may only be able to recommend the products of one mortgage provider or a small panel of providers.

A financial adviser may not be the best route to a future mortgage deal.

But there are a host of independent mortgage brokers who are free to advise you from the whole of the mortgage market.

However, be aware that they may take commission from the provider they recommend to you.

You may also have to pay a fee for independent mortgage advice.

It is also wise to do your own research to compare the rates that a lender or broker is offering you.


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What is remortgaging?

Remortgaging is when a borrower who already has a home loan with one lender switches it to another one.
The practice was relatively rare until 15 years ago, when lenders mostly offered only basic variants of variable rates.
The assumption was that borrowers would simply stick with their existing mortgage for its full duration.
Competitive market
But in the early 1990s, as property prices fell and the market was in the doldrums, mortgages became much more competitive as lenders realised that the only way to win new business was to battle for each other’s existing borrowers.
Thereafter, lenders also found themselves competing for business among new homebuyers, offering ever more sophisticated deals.
Initially, they tried to keep their borrowers by tying them to heavy redemption penalties, sometimes stretching for years after the special deals that first attracted them came to an end.
Today that practice is largely non-existent, with most penalties applying only for the lifetime of the deal itself.
Meanwhile, some 40% or more of all new loans in the UK each month are remortgages.

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