Everyone has a long treasured dream of purchasing their own home. Nevertheless, under the trying economic circumstances, it's not an effortless job to turn that dream into reality. Even though a home mortgage loan may prove to be quite valuable, you always run the risk of failing out on your payments. If you're already taken out a mortgage loan and facing problems in paying them off, a mortgage refinance helps you crawl out of your payment difficulties. With a remortgage plan, you'll be able to swap your old mortgage terms for a fresh one, and that too without changing residence. Owing to the huge credit crunch, it could be difficult to receive viable remortgages at present. Nevertheless, refinancing can still generate huge savings. A refinance of your existing loan can present you with a lesser monthly payment or make use of the equity within your home. The term “remortgage” is pretty similar to refinance. The advantages of a remortgage plan may vary on the basis of individual objectives, but you may hold the option of consolidating multiple credit card debts while receiving a reasonable interest rate on your mortgage. If used sensibly, a refinance can offer several means of recovering your finances, for example choosing a 15-year loan to reimburse your current loan before the scheduled time.
Change in the mortgage terms
The most common reason behind remortgaging is to adjust or change the existing loan provisions. With a lower interest rate you'll have lower monthly mortgage payments, which in turn will also trim down the borrower's monthly expenditures. A short-term refinance loan, for example 15 years in place of 30 years, will help in the mortgage repayment process and save loads of cash over the term of the loan.
Drawing on the home equity
If the value of a home increases, a remortgage can let you use the equity for consolidating other debt that includes a higher rate of interest, for example credit card debt or car loans. Equity may also be used to meet college expenses, home renovations, weddings, or other massive expenditures.
The process of re-mortgaging your home
The re-mortgage process is pretty analogous to the process of taking out the original mortgage for your home purchase. However, the borrower may need to have a valid evidence of steady income, strong credit rating, and a relatively low debt-to-income ratio.
Remortgaging is all about reimbursing your existing mortgage by taking help of another mortgage. The main reason why people opt for refinance is that they have found out that the re-mortgaging process helps them save a lot of money. This can be done in two ways. The first way is by obtaining a mortgage with a lower rate of interest. The second one is by obtaining a mortgage with a shorter loan term, which results in a lower monthly payment.
Prior to investigating remortgage, make certain that you completely understand the cost factors and variables involved in a refinancing process. These factors include such things as closing costs, APR (annual percentage rate) and prepayment penalties (if any).
The very first step in remortgaging you home is to have a clear view regarding your existing mortgage, including factors like the current interest rate you're paying, prepayment charges if applicable, and the remaining tenure of your loan.
About the author:
Rikk is a guest blogger for estatechase.com, a financial writer associated with mortgagefit.com and has been contributing his suggestions to the Community since 2011. He has also made notable contributions through various articles written on different subjects related to the mortgage and real estate industry.
Share this article: