We are, without a doubt, in the middle of one of the worst economic depressions that the world has ever seen. The funny thing about this economic down turn is that it makes for a great time to remortgage. Let me try to explain the reasoning here because I am certain a few of you (probably more like all of you) are laughing. I know it sounds like a big joke but think about it.
This economic choke is not limited to just you and I; “The Consumer”. Lending institutions are also feeling the hurt because guess who is actually at fault for the current state of things? That’s right! The bankers. These guys thought it was a good idea to offer great mortgage rates at insane 125% house values and ridiculous wage to payment ratios.
With the job market down and prices up along with a housing market that leaves much to be desired causing homeowners to balk and fold.
When the dust settled the bankers are scratching their heads and the homeowner is facing difficult decisions, and sometimes repossessions
The lending institution wants their money and you want to keep your house. With this in mind there is no doubt that the lender will do anything they can to get paid and that spells out big savings for you. Needless to say that we are in an economic “crunch” and we are all feeling the crushing sensation. This entire affair is a very stressful one for you; the homeowner. Remortgaging now offers, for many, more possible headaches than sleepless nights but read on for hope. There are very good mortgage rates out there so do not be afraid to look just expect to pay a fee known as an “arrangement fee”. Look at these fees as a sort of paper work or finder’s fee. Be careful though because you may find yourself paying out more money especially if you are looking at variable rate mortgages. The goal is to allow it to get better and not worse!
Despite the fact that the lenders are being cautious they are still remaining very competitive. Keep their competitive nature in mind as you price the rates of mortgage loans. Never feel bad about looking around for the absolute best rate and, if you get a chance, pit the lenders against each other. It is just like going to buy a car. The absolute “bottom line” number is never what they tell you it is especially if they know that you are actively looking elsewhere. This will drive them into frenzy and even though they may not make a fortune off of the loan they still make a sale and gain a long-term customer (assuming you were not a customer prior) and these two things can make them eligible for a bonus or advancement.
Even though this can be a stressful situation keep the following things in mind in order to get the best possible remortgage rates:
Plan, Plan, Plan
Planning ahead is an essential part of the remortgaging procedure. There is such a thing as too late in this remortgaging game. If you wait until the last minute do not expect rates to be overly favorable for you. If you wish to get the best rates, as well as be able to give yourself some shopping around time, start looking for rates at least 3 months prior to you actually needing to remortgage.
Read the Fine Print on Costs
When you got your first mortgage there were a lot of other added costs associated with it. You would hope that remortgaging would be simpler but there are still costs involved in the refinancing. Be certain on how much money you will need. There is no need to be caught off-guard! Read the bottom line stuff or let a solicitor look it over.
One fee that is often forgotten about is the arrangement fee. This fee is typically assessed with each mortgage and remortgage that you participate in. One loan that usually lacks this fee is the variable-rate mortgage loan because your payment can increase each month. The arrangement fee acts to offset the lack of funds associated from low interest rates. The fact that the likelihood of you getting a variable-rate loan to continuously be low is not very good which makes looking for a fixed-rate loan look better if you don’t mind the arrangement fee.
The fixed-rate loan allows you to know exactly how much, per month, you will have to pay out to your lending institution. There is a very small price to pay for having peace of mind. This fee can be added into your monthly payments so you don’t have to worry about yet another bill. The warning here is that if the rates happen to go down you will be stuck at the higher rate.
There are also other services labeled as “additional” that you may need to consider that are offered with your mortgage loan. One such added fee is PPI (Payment Protection Insurance). If you could manage to afford this additional fee then do so because if for some reason you can’t pay your loan the PPI can take care of your repayment amount for up to a year. Do not opt for it though if it would further harm your financial position.
Always be Prepared in Case Payments Rise
Despite how hard some people try they simply cannot predict the future. There is no hard or fast rule to how rates will go in any given month. Will the rates go up a little or will they skyrocket? Is my loan going to drop the basement and save me money? In the end the one steadfast rule is to always be prepared for the inevitable mortgage rate increase. This is yet another reason why a fixed-rate mortgage loan can be better in the long run for you than a variable-rate loan. If you don’t think you could qualify for the fixed-rate loan then consider asking about a variable loan amount that has a cap. What the cap does for you is give you the ability to know exactly how much money, on the high end, you will need each month.
Don’t be Caught in the Early Repayment Trap
Sometimes the unforeseen can happen and we wind up getting a financial boon. The first bill we want to get taken care of is the largest – the mortgage! Under most circumstances there are not any penalties for good repayment behavior but make sure you take the time to read the fine print or ask that question of your lender. You would think that repaying your loan early would be a good thing and it is – for you. For the lender the early repayment fee is there to make up for any interest they may lose out on if you had continued with the payment schedule. These fees usually apply when you have a fixed-rate mortgage loan or a discounted one.
Added Annual Interest Fee
There are some mortgage loans that will, on top of their normal taxes and fees, hit you with an annual fee at the end of the year. In other cases the lender may assess you a fee based on what you owe them at the beginning of the year so if you have a lower interest loan you will be hit harder over time.
Daily Interest Rate – Worthwhile or Waste of Time?
The easy answer here is most definitely YES! There are some lenders that will assess your loans interest on a daily basis rather than monthly. They base the interest on the current rate then multiply that by what you owe at that time. The more you pay off on your mortgage the less in interest you will pay. This may not seem like an enormous difference at the time but once you look at the money saved over the course of the entire loan you will notice the savings. You may be able to pay off your loan several years before it is due but just watch out for those early payment fees.