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How to Refinance your Home

How to Refinance your Home

Now may be the opportune time to look at refinancing your mortgage. Many borrowers will be coming to the end of their two or three year fixed rate mortgage loans that were set up at the height of the property boom in 2006/7. Finding the right option is crucial now that the market has radically changed.

You must do your research to find out what deals are available. Despite the credit crunch there are still some attractive deals out there for the right customer. The challenge is finding them and having exactly the profile that the lenders are looking for. Always steer clear of no credit check loans with exorbitant interest rates and penalties.

Prime consideration is deposit. The more equity that you have in your home the better the deal you will be able to command. Anyone who has bought a home in the last five years may be struggling to show the 20% plus equity in their current home unless they have had a really good run in property over a long period of time. There are deals for those with lower deposit levels but you should be prepared to pay a higher interest rate. If you have less than 10% deposit you may struggle to find a realistically sensible option.

Much of the capacity has gone from the market following a series of domestic consolidations and a flight to their home markets by overseas players. Therefore, lenders are being very choosey about who they lend to since the market is still fragile. In addition to a large deposit, lenders are also looking for customers with a good credit history. If you have a blemish somewhere in your recent past then it may affect your credit score with companies – but they all rate such indiscretions differently so a knock back by one may not mean that they will all reject you. Check your credit history and make sure that all the facts are correct. Companies such as Experian and Equifax offer a free one month subscription service that allows you to access all the relevant information.

Opinion is divided on the best course of action regarding remortgaging. Interest rates are currently at all time lows and are expected to remain so for a little while yet. As the recession slowly ends, it may take some time for rates to rise so it could be worthwhile sticking with your current lender on their standard variable rate rather than looking for a fixed rate.

There were many more options available to borrowers a few years ago than today. Getting an interest only mortgage will be a challenge for everyone unless you have a large deposit and good credit history. Repayment mortgages are now coming back into favour with lenders and borrowers alike. Expect to move to such a plan to find the best deals. All lenders have increased both their rates and fees so remortgaging will not be a cheap option.

Finally, if you are looking for a fixed rate deal then think carefully about the period you are looking for. With interest rates set to be low for some time you could find a short term fix expensive. Longer term fixes are available up to 10 years but you need to have some certainty that you will stay put since breakage costs for early redemption can be very high.

Remortgaging to clear mortgage debt or other loans is much more difficult to achieve in today’s environment. Lenders are far more cautious about who they lend to and for what purpose than before so be open and honest to avoid confusion.