Types of Remortgage

Types of Remortgage

Types of Remortgage

Many homeowners are choosing the remortgage option because of the problems that mortgages are causing. The fluctuating interest rates associated with mortgages currently are pretty discouraging to many homeowners, who are choosing the option of remortgaging their house of property to obtain a lower, more manageable interest rate. Remortgage, basically means taking out another loan on your house or property from a different lender; this lender will pay off your existing mortgage, leaving you with hopefully lower monthly payments and/or interest rates. There are actually quite a few different types of remortgages, keep reading for more information on common types of remortgages.

Standard Variable Rate Remortgage:

This type of remortgage is commonly referred to as SVR and is based the base rate for lending provided by the Bank of England. Most lenders that offer standard variable rate remortgages will typically offer them at two percent above the lending rate of the Bank of England. Typically, the better a credit rating that a borrower has, the lower rates he or she can expect. Standard variable rates remortgages is probably the most popular type of remortgage.

Discounted Variable Rate Remortgage:

With this type of remortgage, lenders will attempt to attract in borrowers by offering remortgages at a discount for a certain, specified amount of time. After the specified time is over, the rates of the remortgage will become the same as the SVR.

Fixed-Rate Remortgage:

With a fixed-rate remortgage, the lender will offer interest rates that will remain constant for an agreed upon period of time. Once that time period is over with, the interest rates will be based on the SVR. A lot of borrowers find refuge in this type of loan because they will know exactly what their interest rates are for a specific period of time, rather than having to worry about fluctuating interest rates. One disadvantage however, is the fact that if the market rates drop below your fixed rate, you will still have to pay the fixed rate.

Flexible Remortgage:

A flexible remortgage offers flexibility to the borrower by allowing him or her to adjust the repayments due to certain financial situations. If the borrower suddenly has a good amount of extra cash, then he or she can pay off as much of the remortgage as possible, then in the case of not having any cash, he or she will not have to worry because an extra portion of the remortgage has already been paid off.

Capped-Rate Remortgage:

If the best rates are taken from fixed rate and variable rate remortgages, then that is a capped-rate remortgage. There are two distinct disadvantages to capped-rate remortgages, and they are that there are usually higher interest rates that are to be paid, as well as an administration fee. However, capped-rate remortgages offer protection from rising interest rates and ensures that the borrower never has to pay any higher than the capped rate.

Listed above are some of the most common types of remortgages in the United Kingdom. However, the information is merely just a brief overview. Before applying for any type of remortgage, it is important to do deeper research into the subject so you know exactly just what you are getting into.

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