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Remortgages Guide
Outlined below is a useful remortgages guide. Remortgaging has become increasingly popular due to the relatively simple and flexible process.
A remortgage is exactly as the name suggests, taking out a new mortgage and repaying your existing one in order to realise equity and sometimes to reduce monthly payments.
Basically, a remortgage is when you transfer your existing mortgage agreement to another lender. A remortgage will mean that the new lending company will pay the old provider the balance of the amount outstanding and you will continue making your payments to the new lending company.
Many people do not realise that they can simply pay off their current mortgage and take out a new one. By remortgaging your home, you could save significant amounts on your monthly payments.
Review your current mortgage. If you feel you are paying excessive rates of interest, compared to other lenders then a remortgage may save on your monthly payments. Alternatively, you may be looking for a way to finance an extension or purchase a new car, you could seek to increase your mortgage and take the extra sum as cash.
A remortgage can be used for the purpose of gaining lower interest rates on your mortgage or raising finance through releasing equity. Releasing equity is a good way of raising additional finance. If your home has positive equity - its market value is greater than the outstanding mortgage - you can increase the size of your mortgage.
A remortgage is a great way of saving money, as it is likely to lower your mortgage interest rates. A mortgage is also one of the cheapest forms of loans around, so if youre looking to raise finance, it makes sense to remortgage your home.
There are various reasons why someone would remortgage. Quite often it is just a cost saving exercise to reduce the monthly payment, although increasingly it is seen as a way of consolidating debts and reducing the overall household outgoings each month.
One of the most common reasons for remortgaging is to reduce costs. By switching to a lower interest rate you can either benefit from lower monthly repayments, or keep the monthly repayments the same, thus repaying the loan quicker and reducing the overall term of the mortgage.
Another reason to remortgage is in order to raise additional cash. Due to the rapid rise in property values over the past few years, many people now have mortgages which are well below their homes current value. The difference between the property value and the mortgage debt is known as equity. The majority of mortgage lenders will allow you to increase the size of the mortgage in order to tap into some of this equity. The cash raised can be used for a variety of purposes, such as home improvements, holidays, a new car, or the consolidation of existing debts.
The advantage of borrowing money against your property is that the rate will almost certainly be better than if you took out a personal loan, and because you can spread the cost over the remaining term of the mortgage, the repayments are lower.
Unlike moving house, arranging a remortgage can be surprisingly simple. There are no chains of buyers to worry about, so the whole process can often be completed in a few weeks. The remortgaging process from start to finish normally lasts between 4-6 weeks.
In terms of costs there is no stamp duty to be paid, as you are not purchasing a property. Many lenders will pay some or all of your valuation and legal fees. In some cases there may be an arrangement fee or booking fee from the new lender.
Whether to remortgage depends on interest rates. You always have to be sure that you can meet the repayments whatever the economic climate. There may also be redemption penalties on your existing mortgage and you will need to take these into account when assessing how much money you could save by remortgaging.
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About The Author
Homes, To B(uy) or Not to B(uy)
Whether you are just moving out on your own for the first time, or you?ve moved ten times before, there is always a big choice to make. Do you rent or buy your home? There are valid arguments on both sides, and in different scenarios either one could be the right choice. When you start looking into your next, and possibly final living space, there are a number of things you should consider.
When deciding whether to rent or to buy you might first look at how long you plan to stay before moving again. If you thrive on frequent change and the freedom of spontaneity, buying might not be the best choice. Renting a house is often considerably easier than selling one.
Another more obvious consideration is your financial picture. Do you have enough for a down payment of 10 percent, or is one month?s rent more in your budget? Credit worthiness is a significant factor. In order to secure a loan you will need to demonstrate capacity to repay, strong credit history and collateral to secure the loan. Although your credit union can help you explore some viable lending options if you have a few credit blemishes, very poor credit may eliminate all funding options. You may choose to rent while you rebuild your credit score and save some money. Some advantages of renting
1. You have to pay a deposit to move in, but can get it back at the end of your lease, assuming there is no damage to the property.
2. Repairs to the property are generally covered by the owner.
3. You do not have to pay property taxes or insurance (although you should consider renters insurance) on the rental property.
4. You do not have to worry about marketing it yourself if you chose to move.
These can be powerful advantages for people without strong community ties or in temporary circumstances or with financial concerns.
Some disadvantages of renting
1. You have no equity in your payments, and when you move, the money you paid to rent is gone.
2. You have to abide by the rules of the property owner, and many times the rent does not reflect on your credit unless you have a negative experience, such as an eviction.
3. You are limited in terms of creating a space ?uniquely yours? (i.e. limited possibilities for remodeling).
A few thoughts on buying
Buying a home requires a good deal of thought and investment, but it can be an excellent option for those with the credit, money, and desire to remain in one place for an extended period.
The upside of buying a house is that it is yours, and you can do what you wish with it (within reason of course, or you will have neighbors/associations to answer to!). Many homeowners appreciate opportunities to personalize their homes and painting, remodeling, and adding on become exciting options.
Making house payments and improvements on your home also helps build equity, making the house worth more with time. Owning a home also offers advantages at tax time and can be an important resource if you ever need to borrow a large sum of money.
There are some downsides to buying. If it breaks, you get to fix it. There is no maintenance man or deductions on rent for self-repair. You also have to pay all taxes and insurance on your home, causing more of an expense than renting somewhere comparable. Issues regarding value are also in play. Purchasing a home should be an investment. If your home loses value because of changes in the neighborhood or the market you may end up losing money.
What?s most important for making the best decision for your situation is research and a careful review of your short and long term financial goals. The choice is yours.
Should You Refinance Your Mortgage if Interest Rates Drop?
Mortgage refinancing is when you take a mortgage of a certain interest rate and term length, and change it for a different interest rate and term. If you are looking to refinance your home loan it is usually done when rates have dropped considerably therefore making it advantageous to do so. When I say considerably it usually means a drop of at least 1% from what youre paying now.
If you have an adjustable rate mortgage and interest rates drop, then locking in to a fixed rate loan for a set term is probably a wise decision. This is especially true if rates are on the rise!
If you are looking to refinance because you need to pay down other debts, try something else, like a debt consolidation loan. The only time you should refinance for this reason is if you are planning on staying in your home for a few years, and the current mortgage rates are lower than the rates you are paying on your debts as well as your current home loan rate.
If mortgage refinancing is something you would like to consider then be sure to ask the lender about the amortization schedule. If it was originally 25 years and you have paid on it for 10 years then you dont want to start over again at 25 years. The amortization should remain at 15 years. You will end up paying out thousands less in the long run.
Refinancing when interest rates drop could save you thousands of dollars, but it isnt the best option for everyone. Discuss your options with a professional and discover what is best for you!
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