It’s expected that 14 per cent of people will be getting a new home this year. If you’ve been sitting on the fence about refinancing your mortgage, now might be a good time to hop off. For years, the loan market in the UK has been a bit shaky. While a faltering economy doesn’t help matters, new government regulations and an opening up of the mortgage market might help you get the type of loan you need and take some of the stress off your finances. Here are a few other reasons why remortgaging might be a good idea now.
You Want Lower Payments
Lower monthly payments are a big reason why people remortgage their home. If you have a relatively high interest rate right now, or your loan recently switched to the variable rate, you might be surprised by the jump in your payments. Refinancing will likely lower the monthly bill.
The Funding for Lending Scheme resulted in banks receiving £80bn in funding. This, in turn, drove interest rates down. Now, banks are flush with cash – cash you can take advantage of.
You Want To Hedge Against Higher Interest Rates
Hedging against higher rates is a good idea. Today, the BOE is committed to keeping rates low, but this is only because it expects low rates to help boost the economy. That might change within a year or two. You’ll want to have a low rate locked in so that you don’t end up on the wrong side of rising variable rates.
In the UK, you have a choice between fixed and variable rate loans. The fixed rate carries a fixed interest rate for the first 2, 3, 5, or even 10 years. Ideally, you’ll get a 10-year fixed note. This means you have 10 years of fixed mortgage payments, regardless of what the economy is doing. The other option is the variable loan.
Variable loans have moving interest rates that change from month to month. This means there’s no certainty in your payment. If you want to hedge against higher future rates, you want the fixed rate.
You Want Cash
One of the forgotten benefits of a remortgage is the cash-out feature. This is a feature on many UK loans that allows you to get cash back from the refinance. How this works is really simple. First, you refinance your home – this immediately lowers the interest rate and payment. But, you can extend the loan to include some or all of your equity remaining in the house.
Why would you want to do this? Suppose you see an investment opportunity you want to take advantage of. With a cash-out refinance, you can take advantage of that investment opportunity. Just keep in mind that any equity on top of the original loan will add to your monthly repayment amount.
How To Remortgage
Remortgaging is easy. If you think it might help you, start by shopping around with several banks. Next, shop around with a broker. Often times, you’ll find that a broker will help you negotiate the rate below the listed or posted rate by the bank.
Make sure you ask about all of the fees on top of the basic interest rate. Sometimes, these can make a substantial difference in the total cost of the loan.
Taking Advantage Of Low Property Price in the UK
Property prices are low in the UK. Why individuals are still not buying? Mortgage is the answer in one word. First time buyers and move up buyers are not sure whether they would be able to stay current on their mortgage. The cloud in the employment sector is still lurking; individuals are not sure about the economic forecast.
Moreover, lenders have introduced stricter criteria; after recession even lenders have become skeptical – they are more selective now. Unlike earlier days, not everybody is qualifying for home loans. Hence, even when property prices are low, there is a dearth of buyers.
Cheap mortgages are around the corner
Different building societies in the UK have started to come up with new mortgage range. Leeds Building Society, Coventry Building Society and Lough borough Building Society have introduced easy fixed rate mortgage plans. This is definitely an effort to help prospective buyers purchase homes.
The mortgage products introduced by these companies are quite similar but the rates of interest they are offering are slightly different from each other. The mortgage product being introduced by Leeds Building Society is offering 2.29% fixed rate for first two years. On the other hand, Lough Borough Building Society has reduced the interest of two-year fixed mortgage from 3.55% to 3.35%. And that of Coventry Building Society is 3.05%. However, there are certain
Most people would comment that this will help people buy new homes. But as a matter fact; this would boost country’s economy as well. The main problem with the property market is the buying capacity of people which has reduced in past few years. With this effort by the Building Societies more people would be able to buy homes and this will somewhat neutralize the ‘many sellers less buyers’ situation in the property market.
Moreover, 2012 Olympic is going to be held in London. People are expecting the UK property market to get energized. Landlords and vacation rental property owners are likely to experience a better time in terms of profit. Probably suitable mortgage plans will be introduced by the lenders too.
Once the mortgage industry turns in buyers’ favor things will improve fast. If you ask what is the reason behind such a downturn of the property market then many people would point the finger towards mortgage and lending habits. There was a time when it was easy to get mortgage; and as recession started rolling in many people lost their jobs and found themselves in deep mortgage arrears.
Low fixed rate mortgage for first two years would definitely be helpful for prospective buyers. However, it is always recommended to check the terms and conditions before buying the mortgage. If you are uncertain whether the product is suitable for you or not; talk to an expert.
