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.
Source
Monday, July 27, 2009
Monday, July 20, 2009
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.
Source
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.
Source
Monday, July 13, 2009
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.
Source
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.
Source
Monday, July 6, 2009
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.
Source
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.
Source
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