Uncommon Concerns when Remortgaging
Remortgaging is serious business. After the entire process is complete, most homeowners will have spent months doing research online, spent weeks corresponding with a remortgage specialist, and then gone through stressful days finally negotiating with a lender to decide on a deal to accept. All the while, wondering if they are making the best decisions as each step is completed. There are several small details that are critical not to miss and some large details which could cause the entire experience to go south. After the dust settled, did you ask all the important questions? Did you make sure the remortgage deal you ended up with will benefit you in the future the way you thought it would? Some details about the process are more important than others:
Exit Fees from the current mortgage loan product – Prior to getting deep into a new remortgage loan, the outstanding balance on the current loan product must be taken care of. There is typically a fee for early exit out of a mortgage loan. Check with the current lender to understand what the financial penalty is for opting out of the current deal to search for greener pastures. The early repayment charges are simply a motivator the lender puts in the mortgage agreement to keep the borrower in the mortgage for as long as possible.
Does the lender charge interest daily – If this is the case, it is to the borrower’s advantage. Whenever a payment is made, the interest amount on the loan amount goes down. This is because less interest is always paid on less principal. If the lender calculates interest annually, the interest amount does not go down until after one entire year of repayments. This way is obviously in the best interest of the lender.
Moving homes during the mortgage term – This may be one of the most often missed details during a remortgage. Always remember there is a chance of having to move homes before the end of the remortgage term is up. During the final negotiation period, make sure if you move to another home you can take the remortgage deal with you. This type of a remortgage is known as a Portable Mortgage.
Overpayments – This is one of the beauties of a remortgage. The flexibility of payment schedule and taking a break from payments can be priceless. Make certain that if you would like to make early payments, that is a possibility without penalty. Also, make sure that if you need to take some time off from paying the mortgage that is also possible. You have no idea when bad times can strike. If you negotiate that part of it in the beginning, it will never be an issue and cause you to have to make any rash decisions.
Eligibility – Make sure that you are eligible for the remortgage loan up front, with your income level and employment status. If those two things happen to change make sure you understand what happens at that time. If there are massive changes which take place at that time, make sure that you are constantly able to adjust to the changes and make any unexpected moves necessary.
Check Products – Make certain the deals you are looking at are able to be considered as remortgage products and not just original loan products.
Loan To Value (LTV) – Loan to value is an important number to understand. Most lenders will allow borrowing up to 75% of the value of the home equity amount. The most attractive deals are available at around 60% loan to value.