Remortgage - What Is It And Why You Should Do It
January 22, 2009 by admin
Filed under Mortgage Articles
Remortgaging by taking a loan out on existing property is usually referred to as a home equity loan. Since the homeowner really does not own their home, since they are still paying to the bank, they can not actually use the home as collateral.
However, homes and property go up in value over time, so the home is building equity. Equity is when the home and property is worth more than the amount of the original loan. For example, a person buys a home for $100,000 but it appraises at 150,000. This person would then have $50,000 in home equity or money that belongs to them which they do not owe the bank. They can then remortgage and get a loan for the amount of their equity.
Changing lenders is actually common. It may seem like a strange tactic, but it is very beneficial. Some people start out with a loan that may have high interest or fees because they could not get a better loan. After a couple of years their credit is better and they want to see about lower their fees and interest. This is a good time to remortgage.
Usually a remortgage is not done until after two years with the current lender. This is because most contracts include penalties for early termination of the loan, including paying it off. This is to protect the lenders interests.
The lender is in the business of making money and they do not make as much as they would like when a person ends their loan early. Usually, though, after two or three years the penalties are waived and the homeowner is free to find a different lender.
Normally when you come to the end of your fixed rate period you will be moved onto the lenders standard variable rate, where the inertest rate will be higher and fluctuate. This is when it is a good time to remortgage, switch lenders and start afresh on another fixed rate mortgage product.
Remortgaging can save a homeowner a lot of money. Especially if the original loan carried high interest due to bad credit. By remortgaging a person can find a loan with lower interest. That means lower monthly payments now and less money paid in the long run. It is a great option for the homeowner.
Some homeowners take advantage of remortgaging. They stay with one lender for a certain time until they find a better deal. By remortgaging a person can take full advantage of the opportunity to save a lot of money on their home purchase.
It is not hard to remortgage, which makes it an even better opportunity. All a person has to do is stay current on the lending trends and interest rates. They should keep their credit in good standing as well. When the time is right they can then begin to shop around and apply for better mortgage deals.
Should I take out a fixed-rate mortgage?
January 16, 2009 by admin
Filed under Mortgage Articles
Deciding which type of mortgage to take out can be a difficult decision - especially taking the recent base rate cut into consideration. Your choice of mortgage can potentially save you a lot of money in the long run - or it could cost you more, depending on which way the base rate goes.
Fixed-rate mortgages are a popular choice amongst homeowners, since they ensure you consistently pay the same amount over a set period of time. But are they necessarily a good choice in current housing market conditions?
Advantages of a fixed-rate mortgage
- Offers security. You know how much you will pay towards your mortgage every month - unlike variable-rate mortgages, which are liable to change.
- Increases in the base rate will not affect your mortgage - meaning you could save money compared with a variable-rate mortgage.
Disadvantages of a fixed-rate mortgage
- You will normally have to pay a mortgage arrangement fee. These are normally a few hundred pounds, but for the very best mortgage deals you may have to pay over £1000.
It is common to spread the mortgage arrangement fee across your mortgage payments - but this will of course mean higher monthly payments.
- Just as it is possible to save money, a fixed-rate mortgage could potentially end up costing you more than if you had chosen a variable-rate mortgage. Even if interest rates fall, your mortgage payments will remain the same.
Fixed-rate mortgage in the current housing market
With the base rate recently falling to 3%, and several signs pointing towards further cuts, fixing your interest rate at a level above the current base rate may seem illogical. However, while a fixed-rate mortgage may cost you more in the short term, it’s important to remember that the base rate could go up again.
In short, it’s impossible to predict with 100% certainty what the base rate will do, so choosing a certain type of mortgage is always a gamble, whatever your decision.
Even if you pay more than would have on a variable-rate mortgage for the first few months, a fixed-rate could save you money in the future. Your decision on a fixed-rate mortgage will depend on whether or not you think that may be the case - and how able you are to cope with any changes in your monthly payments.
This article was written by Melanie Taylor, a mortgage expert for Think Money. If you are thinking about getting a mortgage click here.
Benefits of a Smart Move From a Mortgage to a Remortgage!
December 29, 2008 by admin
Filed under Mortgage Articles
If you have paid high interest rates over a period of time on your mortgages, and your equity has built up ever since the real estate prices hiked, you can avail of remortgages. The best solution from being fleeced from your lender and encashing your equity which has built up is remortgage uk.
While mortgage is a method of using your home or property as security against the loan lent to you. ********* mortgage gives you an option to use the same property as collateral and utilize the current low interest rates by applying for a remortgage.
Bad credit remortgage uk can help you if you are thriving hard to repay to your mortgage lender and need to break free from whopping interest rates. Consider the long term benefits of bad credit remortgage uk.
A smart move from a mortgage to a remortgage can help:
Lower your payments with a reduced interest rate
Liquidate your equity built up in years
Merge two or more high mortgage to clear of debts
Shorten your repayment term
Switch over from an adjustable rate to a fixed rate
Get a remortgage quote, compare your earlier mortgage rate with the current rate. If it’s lower than your existing mortgage rate, opt for a remortgage and reduce your payments by taking advantage of the current low rates.
Remortgage makes possible mortgage debt consolidation. If you can’t meet multiple mortgage loans, ********* helps you combine them into one large remortgage loan thus brings down your interest rates drastically.
With years of having obtained a mortgage, your equity would have built up now. Make use of this built up equity, remortgage uk liquidates your equity, thus offering you lower rates with high equity value.
By reducing your mortgage term from 30 years to 10 or 15 years, you can save a lot of interest rates that you would have otherwise been committed to for 30 long years.
If you are fleeced with adjustable rates then fixed rate of interest can give you a solace. With remortgage uk, you can switch over from an adjustable rate to a flexible rate and get better rates.
For cost-effective and reliable remortgage loans visit online. Compare remortgage quotes online and opt for the best.
For any further assistance on remortgage loans visit: Personal Loan UK
Which is best Adjustable or Fixed Mortgage?
November 6, 2008 by admin
Filed under Mortgage Articles
There may not be a wrong or right answer to the question above. Both options have their good and bad points. Before you even look at houses, you should take a few minutes to look into both and what they have to offer you and your family.
If you are planning on living in your new home for less than 5-7 years, an adjustable mortgage is absolutely worth considering. Starting you out at a lower interest rate can definitely save you some of your hard earned cash every month. An ARM (Adjustable Rate Mortgage) also will put you in consideration for a larger mortgage, thus allowing you to splurge on that larger home you are wanting. Take time to run the numbers through a mortgage calculator to see where the payments will end up.
However, ARM’s can definitely have a down side as well. After the honeymoon period is over, the interest rates can spike well over 10.00% over time. This can cause your once coveted dream rate to become your worst nightmare.
If you decide you want to play it safe, a fixed mortgage is right up your ally. Giving you complete control, you know exactly how much you will pay every month for the life of your loan. This allows you to budget your finances and plan for your future much more efficiently.
Although a fixed mortgage may be the simplest option, it could bring a little headache down the road. When rates have dropped and you are still stuck with your trusty rate for another 20 years, you may want to consider refinancing. This will require more paperwork and additional costs associated with appraisal and closing. You also will have no initial rate cuts as you would with an ARM.
Take time to run the numbers through a
mortgage calculator to see where the payments will end up. Your best option is to take an honest look at your budget and set a definite amount you don’t want to exceed. This will help when it comes time to pick out a beautiful home while keeping your feet planted firmly on the ground. Whether you decide an ARM or Fixed mortgage is best is pretty much just a personal preference.
Guest Post by David Kent of Buyers Agency, Real Estate Agents by visiting www.buyersagent.net
Are long-term fixed-rate mortgages a good idea?
November 6, 2008 by admin
Filed under Mortgage Articles
A fixed-rate mortgage can offer security to homeowners, especially during the kind of uncertainty the economy is currently facing. Having a fixed interest rate means you know you will be paying the same amount every month, allowing you to plan the rest of your finances around your mortgage.
Compare this to a variable-rate mortgage, in which your payments can potentially change from month to month, and the advantages are clear. However, variable-rate mortgage payments can fall as well as rise, so it is hard to predict whether a fixed-rate mortgage will save you money, or cost you more.
Fixed-rate mortgages most commonly last around two to three years. However, a number of lenders have started offering much longer terms in recent years - lasting 10, 15 and even 25 years.
Here we take a look at the pros and cons of long-term fixed-rate mortgages.
Advantages of long-term fixed-rate mortgages
Long-term security
Fixing interest rates for 10 or 25 years means that you will know how much your mortgage outgoings will be for up to the duration of your mortgage. This allows you to plan the rest of your finances more easily, and is a guarantee that you will not experience any shock rises in your monthly payments - one risk associated with variable-rate mortgages.
Only pay one arrangement fee
Two-year or three-year fixed-rate mortgages mean that you are likely to pay an arrangement fee every two to three years. Some lenders will allow you to add this onto your mortgage, but this will incur added interest and increase your monthly payments. In August, Moneyexpert.com said the average mortgage arrangement fee was £860 - which could be a burden to many homeowners.
A long-term fixed-rate mortgage only carries one arrangement fee, and in many cases this is no more expensive than those on two or three-year deals. Over the course of a 25-year mortgage, that could save you between £6,880 and £10,320 compared with three-year and two-year fixed-rate deals with similar interest rates and arrangement fees.
Disadvantages of long-term fixed-rate mortgages
You could still end up paying more
If interest rates go down while you are on a fixed-rate deal, you will not reap the benefits, since your rate is fixed. If your terms are fixed for as much as 25 years, and average mortgage rates over that period are lower than your deal, you could end up paying more than if you had a) chosen shorter terms and remortgaged every few years, or b) chosen a variable-rate mortgage.
Short-term fixed rate deals could be cheaper
Despite the convenience of only having to pay one mortgage arrangement fee, a long-term fixed rate could still cost you more than if you had remortgaged every two or three years.
Let’s assume you have a £120,000 mortgage with a 25-year fixed rate of 6%, and a mortgage arrangement fee costing the average £860. In total, the mortgage would cost you just over £775 per month.
Now let’s assume remortgaging frequently gets you an average interest rate of 5.5% over the course of 25 years, after which your mortgage is completed. That’s an average £734 per month. Even if you spread the £860 arrangement fee across your monthly payments, that’s £758 per month on a three-year deal, or £770 on a two-year deal.
Early repayment charges
Most fixed-rate mortgage deals carry early repayment charges, since any early repayments reduce the amount your lender will receive in interest. On long-term fixed-rate mortgages, these tend to be higher than on shorter-term deals - so while there is scope to remortgage if you find yourself paying too much, it will cost you a lot to do so.
So should I choose a long-term fixed rate mortgage?
As with many financial decisions, there is no clear-cut answer to this question. Nobody can successfully predict what will happen in the financial markets, and when choosing a mortgage you will always hope other deals do not become cheaper.
The most important thing is to make sure you will still be able to afford your mortgage if your payments increase. Before you decide on a mortgage, take a look at the existing rates and work out how much your monthly payments would rise if your interest rate went up by one or two percentage points. If you are unsure, make sure you ask an expert mortgage adviser.