Remortgaging

Have you ever heard the word Remortgaging? Remortgaging can be interpreted as an agreement to change the existing mortgage for a new mortgage arrangement, and usually remortgaging deal with a different mortgage providers. in the presence of remortgaging then you can achieve a better mortgage deal from one lender to another lender. you should look at the mortgage every 3 years if you can save money.

we know that most people in this world think that the mortgage payment is the primary financial commitment, so it makes sense if you make sure not to pay the mortgage is more than you need. If you pay the lender standard variable rate (SVR), for example, there is a good chance you can save money by shopping around.

Approach your current lender first to see what they can offer you. After all, you may not need to move your mortgage to another lender to achieve a better deal. Then, have a look at the deals currently on offer from other lenders and, if you see an attractive rate, contact the relevant lender for a decision in principle.

If you decide to switch provider, contact your existing lender for a redemption statement so that you know exactly how much is required to redeem your existing mortgage. You can also check any fees that may be charged to bring that arrangement to a close. You will need a solicitor or licensed conveyancer to handle the legal work and you can either appoint your own or use a firm recommended by your new lender or broker.

A remortgage can be a way to free up some cash for home improvements or debt consolidation. Consider the current value of your home and the level of repayment that's affordable. Remember, if you are increasing your mortgage to consolidate debts, it will cost you more in the long term to pay back a loan over, say, 25 years rather than 5.

When you're shopping around, bear in mind that many of the best deals are aimed at homeowners with a lower loan to value ratio or LTV. For example, if your home is worth £200,000 and your mortgage amount is £150,000, you have a loan to value ratio of 75% so should qualify for a lender's best available rate. A higher loan to value could incur higher lending charges, so make sure you receive all the relevant information upfront.

What type of mortgage?

The first choice you need to make is between an interest-only mortgage, repayment mortgage, or combination of the two.

Interest-only

With an interest-only mortgage, you are repaying the interest on your loan, not the actual loan amount. If you opt for an interest-only mortgage, it is very important that you set up a suitable investment plan to build up enough money to repay the loan at the end of the mortgage term. If you originally took out an endowment mortgage, there's a chance that your investment may not perform as expected, so you should consider additional investments, such as ISA's, to make sure you don't end up with a shortfall.

Repayment

A repayment mortgage means that you are paying off some of your mortgage loan amount every month, so at the end of the mortgage term you will not have a balance to repay. Repayment mortgages tend to cost more in monthly payments, but if these are affordable to you then a repayment mortgage could be the answer.

Some people combine a repayment mortgage with an interest-only element so that the balance to repay at the end of the mortgage term is reduced.

Now for the low-down on the types of mortgage product on the market:

Standard Variable Rate (SVR)

A standard variable rate is linked to, but not the same as, the Bank of England interest or 'base' rate. Lenders tend to alter their SVR's as the Bank of England moves its rate up and down, but they are not obliged to do so or pass on the whole rate change.

Fixed

A straightforward concept, a fixed rate mortgage means the rate does not change as long as the fixed rate term is in force. The fixed rate term is typically 2, 3 or 5 years but some lenders will fix for longer. At the end of the fixed rate period, the interest rate charged will revert to the lender's SVR.

Tracker

A tracker mortgage follows the base rate, so if the Bank of England rate rises or falls by 1%, then your mortgage interest rate will do exactly the same. Tracker rates tend to be between 0.5% and 1% higher than the Bank of England base rate, and some of these products have a 'collar', which is a minimum level below which your interest rate will not go.

Discount

A discount mortgage is usually a rate that is discounted from a lender's standard variable rate (SVR). These discounts usually last for an initial period, e.g. 2 years, after which the rate will revert to the lender's SVR.

Cash Back

A cash back mortgage is precisely that - on completion of the mortgage, your lender will pay a percentage of the amount borrowed 'back' to you as a lump sum. Do bear in mind that the higher the cash back amount, the greater and more complex the number of strings likely to be attached to the mortgage, so make sure you understand all aspects of the product.

Capped

A capped rate mortgage could be for you if you want to know the most you will ever have to pay each month for your mortgage, but at the same time you benefit by paying less if interest rates fall. The loan has a maximum interest rate over which you will not be charged for a set period. However, lenders usually set a higher rate for a capped mortgage over, say, 3 years, than they would charge on a fixed rate for the same period.

Offset

In principle, an offset mortgage works by using savings to cancel out mortgage debt. There are two basic types of offset deal, a current account mortgage (CAM) which links a homeowners current account with their mortgage so they see one statement and one balance, and an offset mortgage where the deposits are kept in separate accounts but linked for the purpose of interest calculation. With both types of offset, borrowers usually make a regular monthly repayment.

Buy to Let

Buying property to rent out is very popular in the UK and buy-to-let mortgages cater for this specific purpose. The type of mortgage deal on offer varies from fixed rates to trackers, and lenders will normally require a deposit of at least 15%. Rates are usually higher for Buy to Let mortgages.

Whatever you choose, remember to check any early repayment charges that may apply if you want to move your mortgage again. You should also consider arrangement fees, valuation fees, legal costs and higher lending charges when you're assessing which deal is best for you.

Read the Key Facts Illustration for your chosen mortgage - this will tell you everything you need to know to make a decision about your mortgage.

If you are using a broker, make sure you're aware of any additional fees that you may be asked to pay.

Finally, ensure you have adequate buildings and contents insurance (you are not obliged to purchase this from your lender).

You may also want to consider Mortgage Payment Protection Insurance which should cover your monthly mortgage payments if you have an accident or become ill and are unable to work, however certain conditions and restrictions apply.

Source:http://www.teachersbs.co.uk/news/articles/11-01-31/Guide_to_Remortgaging.aspx