Some Remortgaging Issues You Should Always Be Prepared For
Since the financial crisis, the mortgage and property markets have been extremely sluggish with property prices dropping significantly
. But since news that the Bank of England base rate is due to increase, lenders have been littered with remortgage applications from homeowners looking for lower cost remortgage deals.
Before 2008 it was common for banks and building societies to offer 100 per cent mortgages. This meant that first time buyers were able to get onto the property ladder without having to put down a deposit. Some lenders, including failed bank Northern Rock, even offered 125 per cent loans where borrowers could take out additional funds to furnish or redecorate their new property.
After the credit crunch in spring 2008, the majority of lenders radically reduced the percentage of loan to value (LTV) that they were willing to lend, and all home loans of more than the property's value were abolished, it is unlikely we will see such extravagant lending again.
These days, many lenders will only agree a mortgage for up to 80 per cent of the value of a property. This has meant that first time buyers have had to find a large deposit if they want to get onto the housing ladder. With many young buyers not being able to save such substantial deposits, thousands of people have been unable to buy.
The tighter lending criteria has also meant that many people with an existing mortgage have found it very difficult to find a remortgage deal, as lenders are often still requiring a 85% loan to value application to proceed, meaning that you would need to have 15% equity built up (paid off) in the property to change to a different mortgage deal.
They should now wait either for the borrowing criteria from banks to improve or for the equity stored in their property to grow by a sufficient percentage, and with the economic outlook as bleak as it is, it is uncertain which is likely to happen first?
For those mortgage loan customers who currently have enough equity in their home, re-mortgaging is much easier, and there are excellent deals on the market. For those who plan to hold on to their existing mortgage provider; there should be a relatively straightforward procedure to access additional funds.
Lenders frequently contact borrowers shortly before the expiry of their existing fixed or discounted rate deal and offer them a range of options. These are often called 'retention' products and they are aimed at discouraging borrowers from remortgaging elsewhere.
If your introductory rate has already finished, you are likely to be on the lender's standard variable rate, which will be low for now, but this will increase when the Bank of England base rate increases, so you might want to look for a fixed rate remortgage deal.
In order to work out which is the best remortgage product for you, it is wise to take professional advice from a mortgage broker. Brokers can research the market on your behalf to compare the best remortgage deals with the products you may have been offered by your current lender. They can also calculate whether a remortgage will save you money.
by: Howard Ogollegos
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