discounted
remortgages
Remortgaging has become big business for lenders.
Borrowers
have now
wised up in
the mortgage
market and
understand
that they
could save
thousands of
pounds just
by switching
to a new
mortgage.
The whole
remortgage
process has
become very
straightforward
and one of
the main
reasons to
remortgage
is simply to
find a
better deal
than the
current
mortgage.
Remortgaging
can also be
effective at
releasing
any equity
you have in
you
property. By
doing this,
the extra
funds can be
used for
home
improvements,
debt
consolidation
or even
paying for a
new car.
During the
remortgage
process, the
existing
mortgage
lender will
be paid the
outstanding
mortgage
balance
which will
then be
followed by
you
borrowing
either the
same amount
or larger
depending on
whether you
will be
releasing
some equity
in your
property.
The new
mortgage can
be borrowed
from either
your
existing
lender or a
new one.
As the
remortgage
market has
grown, the
number of
products on
offer has
increased
and there
are now
various
remortgage
products on
offer by
lenders. A
discount
remortgage
is one type
of this
financial
product. The
discount
part relates
to the
interest
rate that
you will be
charged for
borrowing
the loan.
For an
agreed
period,
usually 2 to
3 years, you
will be
eligible to
discounted
interest
rates. This
means that
you will be
paying a
percentage
below the
Standard
Variable
Rate (SVR).
Therefore,
you have a
guaranteed
lower rate
for a set
period of
time. This
is a cost
effective
way of
remortgaging
as you will
be paying
lower
monthly
repayments
to the
lender,
however
after the
discounted
period has
ended you
may have to
switch to
the lenders
current SVR
for a length
of time
before you
are able to
remortgage
again to a
better deal.
This will
increase
your monthly
mortgage
payment
during this
period which
is a factor
that you
should be
aware of.
Depending on
lender, you
might be
charged for
their
discounted
rate
mortgage
product.
This will be
in the form
or
arrangement
fees; this
is usually a
non
refundable
payment that
will be made
to the
lender for
securing the
discounted
rate for the
agreed
period. The
amount of
fees charged
can vary
between
lenders and
this might
be a factor
when you
decide on
which lender
to sign up
to. When you
agree to
take out a
discounted
rate
product, you
are locking
yourself
into that
particular
product for
an agreed
period of
time. If you
were to
repay the
mortgage
during this
set period,
it is likely
that you
will be
liable to
pay high
penalties.
These
charges are
known as
“Early
Repayment
Penalties” (ERP)
and these
will be
imposed by
lenders as a
way of
recouping
some of
their costs.
The charges
are usually
calculated
on the
amount of
interest
that you pay
and this
will
multiplied
by a number
of months
which will
be agreed
prior to you
agreeing the
mortgage to
go ahead.
The
discounted
rate will be
a fixed
rate;
therefore,
your monthly
mortgage
payments
will remain
the same for
the duration
of the set
period.
Should there
be any
changes to
the SVR, the
fixed
discounted
rate will
not alter
and you will
be exempt
from any
rate
movements
during the
agreed
period. If
you opt to
take a
discounted
rate for a
shorter
period of
time, for
example 1
year, the
amount of
discount
will usually
be higher as
the
timeframe
increased,
the amount
of discount
will
decrease.
Once the
discounted
rate period
has ended,
some lenders
will allow
you to
switch
products
immediately.
This allows
you to
remortgage
once the
discounted
period has
stopped,
therefore
allowing you
to save
money by
applying for
a new
mortgage
with a
better
interest
rate option.
Remortgaging
has become
big business
for lenders
and now
provides you
with a very
competitive
market. This
is
beneficial
to you as it
mean the
interest
rates on
these
mortgages
are also
competitive.
It’s worth
checking
with various
lenders in
order to get
the best
deal on
offer. Most
lenders have
internet
sites that
can be
checked to
compare
lender rates
and it’s
through the
internet
that you
will also be
able to
apply to
remortgage.
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