Refinance Loan Articles

The facility known as refinancing is used by homeowners for a number of reasons from reducing their mortgage costs to increasing their borrowing to fund the purchase of goods or services or to consolidate other borrowing.

Refinancing loans can take a number of forms but the most common for a homeowner is usually better described as a remortgage and the process involves paying off an existing mortgage with the proceeds from a new mortgage using the same property as security. However, the terms remortgage and refinance can sometimes be confusing. A remortgage involves a new mortgage from a new lender, while it is quite normal to be able to refinance with your existing lender by way of a further advance (an additional loan added on to your existing mortgage) depending on what you want to achieve. It is advisable to talk to a mortgage broker to find out which option would suit you best.

A remortgage could be appropriate if you are looking to reduce your monthly payments on your mortgage and your existing lender has nothing else to offer.

Better rate

Interest rates on mortgages vary considerably and remortgaging to a new lender when historically interest rates have been falling has been a way of reducing costs.

Funding a purchase

Depending on the amount of equity (proportion of property value that is not part of the mortgage), in the house, many homeowners have taken advantage of rising property prices to fund the purchase of anything from holidays, cars, second homes and even medical operations! A first port of call would be your existing lender to see whether a further advance would be available and then comparing that with the cost of a remortgage to another lender.

Consolidation

Many homeowners have refinanced other borrowing by making use of the value in their homes. Credit cards and other loans and unsecured borrowing carry a higher rate of interest than a mortgage, and as property prices have risen significantly over the past ten years, have used the extra value in their homes to consolidate their borrowing to reduce their monthly repayments.

Costs

It is important to look at the costs involved in any refinancing transaction and while obtaining a remortgage is fairly simple, the costs of the transaction can vary considerably. For example, your current mortgage might have early redemption penalties which would have to be paid should you want to remortgage. Also, a new lender can charge arrangement fees and in many cases there are the costs of a new property valuation and solicitors' fees.

Remortgage process

This is usually a relatively fast process and is as straightforward and similar to obtaining any other mortgage loan. A new application is made to your lender of choice, which is reviewed in conjunction with paperwork which normally includes proof of income, debts, and expenditures.

A property valuation can be required as well as well as the services of a solicitor, although the new lender's solicitors might work on your behalf as well to keep the costs down. Depending on the lender the whole process can take less than a month to complete.

Refinance Loan Articles