Avoiding the Pitfalls Before Remortgaging

There are simple steps to take in order to optimize the benefits of remortgaging a property. Some potential pitfalls are easy to avoid by doing "behind the scenes" work.

Customer Service

There is a great value in having a lender providing excellent customer service. Timeliness in returning phone calls or emails with important questions is vital in a successful lender-borrower relationship. There is a trust factor which is built when a lender places a priority on timely communication back to a borrower. Check the Better Business Bureau or online testimonies to ensure the lender of choice has a good reputation.

Penalties of Pre-Payment

Secondly, check the original mortgage contract to see if a penalty exists if the property is remortgaged or sold before a particular date. Although pre-payment penalties usually decline over time, if you do decide to pay off the loan early, you may incur an additional penalty. Penalties are usually either a percentage of the outstanding balance at pre-payment time or a specific amount of interest based on the monthly rate. Original mortgage lenders can charge up to six months of interest on 85 per cent of the original loan balance, which could result in significant cost to you. Avoiding pre-payment penalties can usually be accomplished by watching specific dates and having good credit.

Legal Matters

In an effort to limit potential legal fees, avoid signing a loan which forces you to agree to arbitration. The lender usually hand picks the arbitration organization, in the event of a dispute, so the cards can be stacked against you. By agreeing to mandatory arbitration, many of your legal rights are forfeited and an appearance in the lender’s office may be required, regardless of the cost and inconvenience.

By doing some homework and using some common sense, these pitfalls can be avoided and a more successful remortgage can occur.

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