A remortgage is a common financial instrument within the United Kingdom. From a basic sense, a remortgage is the act of settling one mortgage by taking another one out. In this event, the property itself will be used as the security. In most cases, such an action is used to switch between mortgages with the intention of encountering more amenable interest rates.
Types of Remortgages
There are a handful of different types of remortgage deals; each offering its own unique features. One of the most common is a fixed-rate remortgage. As the name states, this vehicle will offer a known interest rate throughout the lifetime of the plan. Thus, the borrower will know his or her exact fiscal responsibilities. Still, one will not benefit if the predominant interest rates fall.
A tracker remortgage will follow the base rate set by the Bank of England (within a margin above or below this figure). While rates may fluctuate, the consumer will benefit from a fall in nationwide figures. A discounted remortgage is a third type. In this case, the benchmark interest rate will be set at a percentage lower than current figures. This option will generally last between two and five years. The only drawback is that if the standard variable rate increases, this will reflect in the price of the remortgage.
Things to take Into Consideration
Of course, the primary concern will be the ability of the borrower to pay back the balance that is owed on the remortgage. This is quite important, for any type of default may eventually result in the foreclosure of the associated property. Also, keep in mind that since the housing crisis, the lending criteria for a remortgage have become much stricter. This is of particular concern for those who have a blemished credit history.
Additionally, the fees that lenders will charge for a remortgage have likewise risen. These fees may actually counteract many of the previous benefits that a remortgage would have provided. Above all, the associated interest rates need to be understood. Speaking with a qualified lender will normally resolve these and other concerns.
How to Get the Best Deal
Like any other type of loan, shopping around for numerous lenders will provide the insight and the clarity necessary to make the most appropriate decision. A few other variables to keep in mind are:
- The future predictions for nationwide interest rates.
- The terms and conditions of the contract.
- The transparency of the associated lending policies.
While a remortgage can be a powerful financial tool, it can also prove to be a significant burden if it is not approached in the correct manner. These tips and tricks will enable the best decision to be made.