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Remortgage in UK
Remortgage is an important financial tool that could greatly reduce your financial burdens. Remortgage is the process of using an asset that has already been placed as mortgage to avail a fresh loan with lower interest rates. The necessity of remortgage arises when your current interest rate is very high. It is usual for lenders to lure you with low interest rates and after which they start charging high APR. Although it seems to be a trap, you can easily switch to a more benevolent lender with lower interest rates using remortgage and save a good sum in the long run.
Benefits of Remortgage
The fluctuations in mortgage interest rates and the increasing competition among the lenders is one of the reasons for the popularity of remortgaging in UK. There are several advantages that come as fringe benefits of remortgaging. Some of the significant benefits are as follows:
• Helps you choose a more benevolent lender
• Lowers your interest rate greatly
• Provides you with flexible repayment options
• Helps you release the equity in your homes
• Relieves excess financial burdens through consolidation of various debts
Benefits of Remortgage
Remortgaging not only helps in lowering the interest rates but also allows you to use the increased value of your assets for urgent cash needs or for alternative investments. There are different types of remortgage loans available in the UK namely Standard Variable rate remortgage (SVR), Discounted variable rate remortgage, Fixed Rate remortgage, Capped rate remortgage, and Flexible Remortgage.
Standard Variable rate remortgage is based on the Bank of England's base rate for lending. It is usual for the mainstream lenders to fix their SVR at about 2% higher than the base rate. However, applicants with good credit score can find better lending rates that could reduce the financial burdens.
Discounted variable rate remortgage is designed to lure the borrower to avail their loans. The lender provides a discount on the SVR for a specific time after which the interests would be as fixed by the management. The advantage in this type of remortgage is that while the actual interest rate is above the base rate the borrower would be paying a rate less than SVR for the agreed number of years.
In Fixed Rate remortgage, the interest rate remains fixed for an agreed period before it reverts to the SVR. This period may vary from 1 to 5 years or even longer. There are both advantages and disadvantages in this type. For example the borrower knows exactly what he has to pay as repayment every month and plan other expenses accordingly. On the downside, it may result in higher interest rates if market goes down, and early redemption of property may also result in higher penalty.
In Capped rate remortgage, the borrower need not pay an interest above the capped upper limit in case there is a general raise in the rate. However, he could enjoy the benefits of lower rates if the market goes down. The major disadvantage is the high rate of interest when compared with other remortgage plans and also a one time administration fee levied by the lender.
Flexible Remortgage allows the borrower to adjust the repayments according to his wishes. For example, you can pay higher installments work toward the early release of the property is your income is higher than it was expected. You can also pay lower premiums or even take payment holidays if you are unable to repay the agreed premium every month. However in order to take payment holidays you need to have over paid your dues earlier.
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