There are important things to consider even after you have determined which remortgage product will suit you the best.
Early Repayment Fees
Typically, there are fees for breaking out of your current mortgage product and starting another one. Find out what the fees are. The benefits of a remortgage usually far outweigh the penalty fees, so most people just accept them and go on. On top of the initial penalty for separation from your current loan product, most lenders will have a penalty set up if you decide to back out of the new one early. Play it smart and understand what fees are involved before making any sacrifices. Also, this is an excellent time for you to negotiate with your lender to see if there is a way to reduce the penalty fee. Thinking you will give something in return for something should be your mindset when approaching the lender about a possible compromise.
Loan to Value Ratio
A large percentage of lenders place a cap on the amount they will lend to anyone based on the value of the property in question. The amount a lender will extend on a property is known as loan to value or LTV. The LTV ratio is the loan amount subtracted from the value of the home. For example, if you purchase a home valued at 100,000 pounds and the lender extended a loan on that property of 75,000 pounds, the LTV would be 75%. This is actually the norm for a property in the UK. The best deals offered from lenders are usually when a buyer comes in prepared for a 60% LTV. This also means that the borrower is ready to put a deposit down of 40%. This is typically not the norm, especially in a tight economy. In addition to being prepared with an acceptable deposit, make sure and check to see if the product you have interest in is indeed available as a remortgage product. To many people it will sound like you need to ask about the obvious. Play it safe, and smart. Do not assume anything, especially now.
Lenders Criteria Since Communication Started
Understand what the lender’s employment requirements and salary minimums are. There is a possibility you could pass with one lender and be totally let down with another. Again, do not assume anything and play it safe.
Fees for Underpaying and Overpaying
For some, this is the primary reason they have started looking for a different mortgage product. Maybe your income situation has changed, or maybe your wife only gets paid bimonthly now compared to weekly before. Maybe you have received a major pay raise and want to pay off the mortgage years in advance. All these scenarios are important to think about for one big reason – extra fees. Many lenders penalize for paying extra each month, due to the extra administration you are causing the institution. Yes they appreciate extra money coming in the door, but not the extra work which accompanies it. Maybe you would like a holiday from paying for 1 month with no late fee added on. There again, is another bargaining chip. Be prepared to give up something if you are asking the lender to compromise on a policy which has existed for years. But at the same time, use the request as something to bargain with.
Daily Compared with Yearly Charged Interest
Find out if the lender is going to charge daily or yearly interest. This could drastically affect how much interest in total you end up paying at the end of the term of the loan. If the interest is charged daily, then after each payment the total is recalculated to be lower than if it just gets recalculated each year. The smaller the total is the less interest you end up paying.
Is the Loan Portable
Discover what happens if you happen to move during the term of the mortgage. Will the mortgage be portable and go with you or will you be starting completely over. It will pay to know what actually happens if you have to move.
