Qualifying to Remortgage

Homeowners looking for lower interest rates and therefore lower monthly payments need to understand what it takes to qualify for those advantages.

Lenders take several things into consideration when determining the risk factor for a remortgage applicant.

First of all, how much you make in relation to how much you owe will be determined. Although some lenders will accept a higher percentage, 38 per cent and lower is average for most remortgages. If your debt to income ratio is much higher, then you may want to concentrate on getting some debts paid down prior to remortgaging.

Another factor that contributes to qualifying for a remortgage is the loan to value ratios. To calculate this ratio divide the amount you want to borrow by the value of your home. For example, if your home is worth 200,000 and you want to borrow 170,000, your loan to value ratio would be 85 per cent.

Most lenders seek borrowers with less than an 80 per cent loan to value ratio to remortgage. However, there are lenders that make exceptions.

Thirdly, remortgage lenders will look closely at your credit score. To obtain an attractive remortgage loan, a good credit score is usually a given. Lenders will offer applicants a remortgage loan with a less than perfect credit score, but it will contain an interest rate and terms that are just not that attractive. If you have a good credit score and a solid history of paying bills on time, you will likely be offered a lower interest rate and better terms.

Keep in mind, lenders will look at the combination of, or the big picture, when deciding on a remortgage loan. It is best to speak to a remortgage specialist and then evaluate your situation to see if you are a good candidate.