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Understanding U.K. Remortgages
Upon conclusion of the term of a mortgage, you may want to look for a new one. For many types of borrowers, this can result in better deals. For example, for a sub-prime borrower who now has equity in their property, it may make sense to take part in one of these arrangements. This is called a remortgage.
Remortgages are often used by debtors to get a better interest rate. The standard variable rate for a loan may be unattractive, and if there is equity in the property, it might be possible to get a mortgage with a better rate. This is one of the most common reasons for a remortgage. Often a sub-prime borrower initially has to incur horrible interest rates as a result of their risky credit status. After three years of solid payments on their loan, it might be possible to get a better interest rate that fits their current financial status as a safer borrower. This is one of the most common reasons for remortgage.
For some, remortgaging won't necessarily improve your interest rate. It depends on market conditions at the time you started the process. This is something you must personally consider before choosing to remortgage.
You should take a close look at the standard variable rates of the new remortgage. Compare and contrast the monthly payments and interest rates to make sure you are getting the best deal. Early redemption charges and exit penalties are important to take a look at as well.
It is probably wise to take an annual look at your mortgage and see if the market conditions are right for a remortgage. Sometimes they will be, and sometimes they will not. If you are a sub-prime borrower, it is probably a good idea to have a long term plan that includes a remortgage. Your current credit status will also affect whether or not it is a good idea. In some circumstances it will not result in a better rate, and in others it will be a much better deal. In your mortgage plan, consider how remortgages might make your plan over time cheaper, and keep an eye on the relative rates very regularly.