When planning to remortgage a home loan this is the basic outline of how you should go about the process.
If you’re planning to remortgage it is a good idea to go about the process in a systematic step by step manner. In order to get the best remortgaging deal you need to consider several factors. By comparing the pros and cons of remortgaging in your situation you can come up with a carefully thought out solution to your remortgaging needs. Here are some of the basic steps involved in a remortgage.
Understanding Your Current Home Loan
Before you consider remortgaging your current home loan you should get to understand and know it properly. Certain features in your current mortgage may make the idea of refinancing non-lucrative. For example, most of the mortgage loan contracts have a clause that does not allow the borrower to refinance his mortgage before a certain period of time without having to pay heavy penalty fees. Even if there are no penalty fees there might be a prepayment charge for closing down a mortgage before the completion of the entire term. These charges and additional costs can sometimes be a deterrent to refinancing your mortgage, especially within the time period when the prepayment penalty fees are liable.
Shopping for a mortgage loan Refinancing Offers
In order to make refinancing your mortgage a reality you have to be aware of the offers that are available in the market. For example, it is usually advised to refinance home loan only if there is a difference of more than 2% between the new and your current mortgage home loan. Because refinancing a mortgage is like taking out a new mortgage loan you will have to take on additional costs such as processing fee, application fee and closing costs. Depending upon how beneficial a deal can get from a lender when you refinance and how much money you can save every month you will have to decide whether paying the additional closing costs is worth it or not. You also need to discover whether you can qualify for the offers that are available for refinancing from various mortgage lenders. There might be an offer to refinance your mortgage at a much lower interest rate but it may be only valid for people with a higher credit score than yours.
You need to get good faith estimates from the various lenders that you are shopping a mortgage loan from in order to get an idea of the complete costs involved in refinancing your mortgage. You cannot make a decision to work with a particular lender till you have got the entire picture of the costs involved.
Getting an idea of the offers are available with other mortgage lenders will also give you a leveraged to get a better deal out of your current mortgage lender in case he is not matching the offers which are available from other refinancing mortgage lenders.
Choosing Terms and Conditions of the Loan
Getting the lowest interest rate on a mortgage loan is not the only criteria for choosing a mortgage lender when you refinance. You may be trying to accomplish other purposes to refinancing as well such as getting extra income, paying off the mortgage faster etc. Based on all these features decide what kind of a loan you want to replace your current mortgage. For example, do you want a 20 year fixed rate mortgage for a 30 year fixed rate mortgage?
Close the Current Mortgage and Start Payments on the New Mortgage
After you have decided which mortgage lender to work with and found the right refinancing offer, you need to go through the complete process of refinancing which is similar to the process you went through when you took your first mortgage loan. There will be approval process, credit check and maybe even a property appraisal process. When the refinanced mortgage comes through you will have to close down your current mortgage by paying it off in full and start making payments on your new mortgage according to the new terms and conditions decided with your refinanced mortgage lender.