Remortgage To Restart The Mortgage Cycle On Fresh Terms

Remortgage To Restart The Mortgage Cycle On Fresh Terms



Remortgage to​ Restart the​ Mortgage Cycle on​ Fresh Terms
Remortgage or​ refinance is​ a​ right that lenders of​ the​ yesteryear were afraid to​ offer to​ borrowers .​
In fact,​ remortgage was severely prohibited through clauses such as​ early repayment penalty .​
The logic was that by refinancing the​ borrowers were actually paying off the​ mortgage earlier .​
In this manner,​ the​ lenders lost a​ large amount in​ the​ form of​ interest .​
Borrowers flinched at​ the​ early repayment penalty,​ but they continued with their demand to​ exercise the​ right to​ refinance .​
Loan providers accepted the​ fact that it​ will not be an​ easy task to​ continue binding the​ borrowers .​
Now the​ right is​ easily exercisable,​ except for a​ few loan providers who continue to​ include such outdated clauses in​ the​ mortgage contract.
Remortgage or​ refinance takes place when a​ borrower approaches a​ mortgage lender with a​ bargain to​ repay the​ existing mortgage .​
In exchange,​ the​ borrower takes up a​ new mortgage on​ fresh terms .​
The new mortgage may not necessarily benefit the​ borrower with cash .​
Different people will use remortgage option for different ends .​
Cash will result particularly when the​ borrower has remortgaged to​ draw extra cash .​
In this form of​ remortgage,​ the​ borrower requests the​ loan provider to​ draw a​ new mortgage with the​ unpaid value of​ the​ existing mortgage and certain amount of​ cash .​
Since this method allows access to​ cash at​ a​ very low rate of​ interest,​ many people use this option,​ especially those who are cash short.
What others do is​ use remortgage as​ a​ debt consolidation option .​
Instead of​ drawing a​ part of​ the​ new mortgage as​ cash,​ people will include their debts into the​ existing mortgage .​
The new mortgage lender repays the​ debts along with the​ existing mortgage .​
Resources at​ the​ rate of​ mortgage when used for debt consolidation save several pounds of​ the​ borrower in​ terms of​ interest.
For people who are not lured by features like extra cash and debt consolidation,​ will find improvement in​ interest rate a​ good enough feature to​ take the​ dip,​ or​ go for remortgage .​
Taking a​ new mortgage on​ fresh terms means that a​ new interest rate regime will become functional .​
Mortgages taken years back will find the​ present interest rates very cheap .​
Remortgage will be viewed as​ a​ step to​ incorporate the​ present interest rates in​ the​ monthly repayments .​
Switching over to​ the​ new interest rates can bring down monthly repayments .​
Search for alternative methods of​ repayment and other features that are missing in​ a​ traditional mortgage leads people to​ take up mortgages like interest only mortgage,​ pension mortgage,​ endowment mortgage,​ etc .​
The only drawback of​ an​ interest only mortgage is​ that a​ very large sum is​ required to​ be repaid at​ the​ end of​ the​ term .​
Instead of​ creating a​ repayment vehicle to​ repay the​ mortgage,​ it​ will be more beneficial to​ remortgage the​ existing mortgage,​ to​ give it​ a​ character similar to​ the​ traditional mortgages.
Mortgage refinancing or​ remortgage must be distinguished from a​ second mortgage .​
While there is​ a​ change of​ mortgage lender and mortgage terms in​ the​ case of​ refinance; second mortgage simply requires an​ inclusion of​ an​ extra debt in​ the​ existing mortgage .​
The mortgagor requests the​ existing mortgage holder to​ either offer cash or​ repay some debts .​
This sum is​ included in​ the​ existing mortgage and repaid through increased monthly instalments .​
Therefore,​ there is​ no change of​ mortgage lender and mortgage terms in​ case of​ second mortgage.
Remortgage helps to​ take advantage of​ the​ increase in​ equity in​ home .​
Loan providers welcome the​ boost in​ equity by offering a​ greater value of​ mortgage .​
Remortgage is​ also beneficial to​ people who have improved their credit status after taking the​ existing mortgage .​
As we all know,​ credit status has enough bearing on​ the​ terms at​ which mortgage is​ lent .​
a​ bad credit score at​ the​ time of​ taking mortgage will result in​ the​ borrower getting mortgage at​ expensive terms .​
Now,​ with an​ improvement in​ credit status,​ the​ borrower can demand a​ better term mortgage from another mortgage lender.
Remortgage is​ not without drawbacks .​
The most visible drawback is​ that repayment extends for another long period .​
The borrower needs to​ again spend on​ several fees like property valuation fees,​ legal fees,​ and administration and arrangement fees .​
This is​ excluding the​ early repayment penalty that some lenders will include for premature settlement of​ accounts .​
The remortgage decision must be taken with sufficient prudence .​
There have been instances when borrowers have fallen trap to​ bad deal mortgages in​ order to​ escape an​ existing taxing mortgage .​
The key to​ a​ best deal mortgage is​ being informed .​
Independent financial advisors need to​ be consulted before taking the​ remortgage decision.




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