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Balance Budget With A Fixed Rate Remortgage

Oct 14, 2007
Deciding to purchase a home is a very important decision to think through. While most experts agree renting is nothing but a money pit, it can be intimidating to purchase something as expensive as a house. Buying a home with a variable rate mortgage can save money initially during times of lower interest rates. However, if the interest rates begin to climb, it can take the amount of the payment through the roof, causing people to struggle to pay for their home, and even lose them due to foreclosure. An ideal solution would be to refinance with a fixed rate remortgage loan, even if the interest rate is slightly higher than the current level being paid. You must be aware of all options, as your homes financing is something you will likely deal with for at least 15 to 30 years.

During the recent housing boom when interest rates were at the bottom, variable rate mortgages enabled folks to buy a home at an affordable monthly payment. Stipulations were built into the loan that at some future point, specifics were often different for each loan, the interest would rise if the prime interest rate increased. When interest rates began to escalate, many homeowners found themselves in danger of losing their happy home.

Acting quickly, some homeowners were able to refinance their home and lock in a fixed rate remortgage, with their monthly payments possibly rising slightly, but still within reach of their resources. However, some homeowners continued to make the higher payments and soon found themselves unable to make the payments and when they attempted to refinance were unable to do so due to a damaged credit rating. Going to an alternative loan site they may be able to obtain a loan, but often with higher interest rates and higher monthly payments as a penalty for missing a payment or two or four.

Many credit companies build into the loan agreements additional penalties that can increase the interest rate charged if the homeowner is late or defaults on any other obligations. For example, if a credit card company would report a late payment, it could trigger an interest rate increase on the home loan, even if those payments were always made on time. Many fail to read this disclosure in the original loan documents and when it happens, it is too late. With the higher rate and increased payments, some homeowners lose their homes.

Regardless of how low the payments may seem to be with a variable rate mortgage, the best deal is with a fixed rate remortgage as the homeowner can count on making the same amount payment every month for the life of the loan. Keeping an eye on interests rates even those with less than perfect credit have the chance of getting a better deal with a fixed rate, as well as getting out from under other debts if they are able to take the equity out of their house.

There will be costs associated with obtaining a fixed rate remortgage, as refinancing the home will take steps similar to purchasing it the first time.
About the Author
James Copper is a writer for http://www.any-loans.co.uk/remortgages.php where you can get information on remortgages
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