Mortgage Refinancing In 2012?

Remortgaging in a Dead Market: If my home is losing money – should I remortgage?

Like chess, and other games of strategy, the game we play with mortgages is a lot more important. Sometimes, when we fail at that game, we can remortgage and start again. Strategy plays a very important part in remortgaging so always plan out your moves well ahead! When you are reaching the end of your mortgage it is time to plan the next step and you pretty much have but two choices:

1. Start paying your lender’s standard variable rate or;
2. Remortgage your loan in hopes of finding yourself a much better deal.

The current market is bringing nothing but uncertainty with it because of the recession, people are scared. It is in these hard times where mortgage lending can take one of two different routes.

The first idea is that due to the bad times we are facing and the lenders fearing a loss in interest funds decreasing that getting a mortgage (or remortgaging) is much easier.

The other issue is that the horizon is ever looming with pitfalls that the lenders tighten their purse strings and get to be a lot more finicky when giving out the loans.

Even if you have a proven track record as a lendee and a homeowner you may still find that mortgage loans are not as inexpensive as they should be and a lot harder to get.

Over the last few years or so housing prices have fallen by 10% – 40% (depending on who you listen to) and there are no signs at this stage of the game that they are going to stop dropping. This is backed up by predictions from the country’s leading financial experts.

Many homeowners are expected to find themselves amidst negative equity. A negative equity is when you owe more to your lender than what your home is actually worth.

Basically a person that took out a mortgage that is 100% of the current value of the home is in negative equity from the onset of the mortgage due to depreciation.

The same is obvious for someone that took out a loan at 125% of the value of the home since you are already borrowing 25% more than the current value.

Negative equity can also occur to homeowners that only place small deposits on their mortgage loans.
Unfortunately for you if you are in the middle of a negative equity issue then you simple cannot take out another mortgage or remortgage.

If you owe £150,000 on your current mortgage it would not be in the lender’s best interest to give you another loan on a property that is now only worth £120,000.

Basically, if you find yourself getting to the end of your mortgage and you see that you will be in a negative equity, you will begin to pay your lender’s SVR.

If by the end of the mortgage term you find that you still have some equity remaining in your home that a remortgage on your current line can still be possible and a good idea assuming you are doing it for all of the right reasons.

Remortgaging for the Purpose of Withdrawing Equity

There are always a myriad of reasons why someone would want to remortgage their home. Perhaps they want to get a lower rate (or at least home to) or they want to make much needed repairs, go on a vacation, increase a university savings fund, buy a new car or several thousand other reasons. Whichever your case might be the number one reason to remortgage is to take out equity from your home.

Not everyone understands the nuances or the lingo of the mortgage world and that is completely fine – that is why you have people like me to help you. One term that is confusing to some people is “equity” – what is it – why do we have it – can we take it out?

Equity is its simplest terms is how much your home is worth at the time you mortgage it – not how much it was when you bought it.

Your equity can increase and decrease over time and through market up and down trends. So if you paid £120,000 for your home when you mortgage the value of your home could be £100,000 and that would be your equity.

As far as the other questions go yes we can take out the equity – that’s why we mortgage and remortgage the home. We have equity due to the market and worth; the asset of the home.

Equity typically rises and falls due to the deposit you placed on the home, any repayments you have made up to the point you are going to remortgage or mortgage and any increase or decrease over the years.

The ups and downs in the value of the home can be anything from outdated pipes that would need to be replaced by the new owner or a new roof you have placed on the home at your own expense.

You will have to rely on the information from lenders and independent surveyors.
Once you have gone to a lender and withdrawn the equity from your home you will have to expect one of two things to occur.

You will have to extend the original mortgage repayment period so that you can cover the added funds placed on the mortgage. The other thing you can expect is to find that your borrowed amount – what you owe on your mortgage – will have to be paid back through higher monthly payments.

Whichever of these two things actually occur the equity of your home increase what you owe on it. If the housing market takes a tumble and continues to decrease you will be risking finding yourself in negative equity which will just continue to pile up.

Of course this negative equity makes it darn near impossible to remortgage.

If you have equity in your home currently then you can draw off of it by remortgaging or mortgaging. If you are responsible in your needs then you can withdraw from your equity in your home without much risk – despite the housing market down turns. The last thing that you want to do is risk negative equity.

Remortgaging for the Purpose of Lowering Your Interest Rates or Increasing Repayments

Probably the most common reason to remortgage your home is in order to change your current deal with the mortgage lender. You will normally do this for one of two reasons:

1. Because you do not like the current interest rate that you have from your lender due to your own current research showing the market trends being lower than your currently or;

2. The payment plan that you are on at this point in time is too much for you to handle and you need lower payments but will handle somewhat higher interest rates and a longer period of time to payback the debt.

Sadly, if you are on a fixed-rate mortgage you may not be able to change your current mortgage terms in order to get a lower interest rates.

Of course this is always dependant on what the current mortgage market rates are at the time you are looking to remortgage.

Regardless of the market, however; you should be able to find a much better deal than your current lender’s SVR. When you are in the middle of paying off a fixed-rate mortgage you will have to pay your lender’s SVR rate when your fixed mortgage comes to an end.

Negative equity is a very versatile pain in the neck. Just because you are paying a lower interest rate does not mean you are protected from this monster.

If you can afford it you can elect to pay more than your monthly payment to the lender (not including paying the interest) you can do so by paying more than normal payment.

This decreases what you on your mortgage loan as well as decreasing your payments. Be smart about it though because many lenders will give you a penalty fee if you happen to pay off your loan ahead of schedule.

Essentially you are actively increasing the equity in your home while decreasing the likelihood of you being stuck with a negative equity.

The bottom line here is that you are avoiding the possibility of damaging the value of your home.