Nearly everyone is familiar with a mortgage, as it%u2019s a banking term for a loan granted to purchase a home. Such a loan is secured against the purchased property, so if the loan is not paid as to the agreed upon terms, the lender has the legal right to take the property as repayment.
The primary difference between a traditional mortgage and a remortgage is simple- the remortgage is a new loan on the same property. Below are a few bits of information that will aid the beginner in attaining a remortgage.
First and foremost, there is not just one type of remortgage option. Each type has its own benefits as well as items that aren%u2019t as attractive:
SVR, or Standard Variable Rate, is a remortgage that has an interest rate that rises along with the average market rate. This most common form of remortgage typically has a fixed rate of interest for the first few months of the loan to make the loan more attractive to would-be borrowers.
Fixed Rate Mortgages carry the same fixed interest rate from beginning to end of the loan%u2019s life. Your payments on this type of loan will be the same for the entire duration of the mortgage, even if interest rates drastically rise. For those who require stability in life, this option is the better of the two, although the rate will be higher than an enticing SVR.
If neither of these seem like the right selection for you, perhaps an intermediary mortgage option is more your style. Droplock loans, capped rates and trackers are different remortgage ideas that combine the traits of both fixed rate and SVR loans.
But some might wonder why someone would remortgage their property and original loan. After all, there are attached fees and such, not to mention that the life of the loan is extended. Even though the long term affects of a remortgage can seem somewhat saddening, the immediate financial benefits can be overwhelmingly positive.
For instance, if your home is in need of repair or could use a few improvements, the funds granted from a cash out refinance not only pays off your existing mortgage, but also allows you to keep the difference in funds to do with what you wish, like make the necessary home repairs. New windows and a bit of insulation can save lots of money on home heating bills.
Other reasons for remortgaging property include a lower interest rate, which translates into lower monthly payments, and paying off credit card balances with very high interest. Whatever the personal case may be, remortgaging can save money in a variety of forms in both the long and short term.
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