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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