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The Downfalls of a Remortgage Option

Mar 4, 2008
A re-mortgage simply means switching your current mortgage to a new loan, usually at a lower interest rate. You can re-mortgage through your current lender or opt to switch your mortgage company altogether. Homeowners generally use the extra cash they receive in re-mortgaging to either make home improvements, take long-needed vacations, or cut down the amount of time they will have to spend paying off their home loan. In any case, re-mortgaging has been around for quite a while, and it looks like more and more people are opting in to its benefits.

The problem many homeowners find when considering re-mortgaging is that they don't entirely understand all of the terms involved with the process. It can be a scary thing to sign papers that you do not completely understand. On top of problems with the lingo, there are the different types of re-mortgage options available to you, including capped rates, discounts, fixed rates, and others. Your best bet in this case is to make sure you are dealing with a credible mortgage company before signing any papers. You can check with the Better Business Bureau and other controlling agencies to make sure that your loan company has a good track record.

Re-mortgaging makes sense for many people. It seems like a good way to put more spending money in your pocket. You have to be careful when looking into re-mortgaging, though, to see the big picture. For instance, most mortgages have an Early Redemption Charge (ERC) for those who switch their mortgage loan too soon. You have to be careful that you are past the ERC time period, or you may be paying these unnecessary charges for years to come. People who run into this situation find that even though they switched to a new lower rate, they do not see the benefits until years later because of having to pay the ERC.

Keep an eye out for re-mortgage arrangement fees when shopping around for a new home loan. These fees are often applied to your new loan to pay for legal fees and valuation of your current property. However, with the competition for re-mortgage business so fierce these days, you are bound to come across a few places that will waive these arrangement fees and pick up the tab for you.

There is no limit to the number of times that a person can re-mortgage. In fact, a savvy homeowner should look at their mortgage situation each year and evaluate if they are paying the lowest mortgage possible. The main issue with re-mortgaging often is watching out for those pesky ERCs mentioned above.

Many people want to know how long the entire re-mortgaging process takes to complete. This is hard to say, as it can vary from lending company to lending company. On average, re-mortgaging takes up to one week. Some can be completed within just days. Your mortgage advisor should be able to give you a good estimate of how long the process will take.

Re-mortgaging definitely has its advantages. As long as you are aware of the potential downfalls to re-mortgaging, you should be able to find a good lender and a good rate.
About the Author
Leo Fogarty is Marketing Director of the mortgage specialists Euromortgage. He is also a regular author for financial magazines, most notably Property Gallery Magazine in Ireland and is an expert on mortgages , remortgages , equity releases and overseas mortgages .
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