Benefits of using a mortgage broker to refinance
Often referred to as simply remortgaging, refinancing a home or property has many benefits. But it’s important to know precisely what it entails, what it can mean for your repayments, and the lifespan of your loan.
This guide will explain everything you need to know before refinancing your mortgage, including the advantages of doing so, what evidence you’ll need to provide, and how we at Loan Corp can help take the stress and uncertainty out of applying.
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What Does It Mean To Refinance A House?
Refinancing a mortgage, or “remortgaging“, refers to “trading in” the mortgage you currently hold for a newer one and using the new mortgage to pay off the old one, so you are left with one monthly repayment and a single mortgage loan.
But why would someone want a new mortgage when they already have one? Read more below:
Benefits Of Mortgage Refinancing
If you want to refinance your current mortgage loan, there are a variety of advantages to doing so, from a lower monthly payment to a less expensive interest rate.
Below are just 4 benefits of refinancing a mortgage, which we’ll talk about.
Shorten your loan term
Refinancing can be a great option if you want to save on interest by shortening the term of your mortgage.
For example, you may have started with a 25-year mortgage, but now you find you are in a stronger financial position, so you can now afford to pay higher monthly payments. In that case, you may choose to refinance to a 15-year term in order to reap a better interest rate where you’ll pay less interest overall.
If you wish, there is also the option to extend your loan term period to lower your monthly payments.
Take advantage of a lower interest rate
Interest rates go up as well as down. Refinancing could be the perfect option for you when the rates are better than when you first were accepted for your mortgage.
This could make your monthly payments lower, and over the life of the loan, you could pay less interest.
Switch to a new type of loan
As you will probably be aware, a whole host of mortgage types are available, and switching to a new type could prove to be a lucrative move. From an adjustable-rate mortgage to a fixed-rate mortgage, there are lots of options which can be confusing.
Thankfully, we can help. Simply give us a call at 0808 301 9509, and one of our friendly and professional team members will be able to discuss with you how we can help you find a new mortgage loan with great interest rates to choose from.
Cash out your equity
There is also the option to cash out for equity, which means you can borrow more than you currently owe on your current mortgage and pocket the rest of the cash for whatever you might need.
Using money from your mortgage loan often allows you to borrow at a lower interest rate than many other types of loan. However, you should be aware that there can be tax implications involved in this.
The Potential Downsides
It’s also important to be aware that there are a few reasons why remortgaging may not be right for every circumstance. The potential downside to remortgaging can include the following:
- The overall cost of your debt obligations increases as the duration of the monthly payments also increases.
- If you cannot keep up with the cost of repayments, your home or property is liable to be repossessed.
- Remortgaging can come with fees, such as closing costs, which could potentially outweigh any financial benefit of refinancing.
- The remortgaging process does not happen overnight; it may take up to 2 months to complete.
Refinancing Your Mortgage: The First Steps
You’ll know from already having a mortgage that the process can be stressful and, at times, quite complicated. Thankfully, when it comes to refinancing, it’s much more straightforward, even if it does follow a very similar pattern of steps.
Firstly, your current lender will write to you well in advance of the expiry date of your current mortgage.
The next step to refinancing a mortgage loan is to find which option will be the best for you and your circumstances. The lender will ask you for much of the exact same details as what was asked for when you applied for your current mortgage.
They’ll then take a closer look at your personal information, your current financial situation, your credit report and score, any assets and whether or not your finances are likely to alter in the future. All this information is compiled to determine whether or not you can afford the mortgage payments and meet the lender’s requirements.
You’ll also have to provide proof of income, usually in the form of 3 current wage slips, your tax status and bank statements.
Remortgaging: Things To Consider
Bad credit history
It is possible to remortgage if you have bad credit, but getting a lower rate could prove to be more difficult if you shop for a mortgage on the high street. Using a broker, such as Loan Corp, can ensure you have the best chance of getting great terms and conditions from lenders only available through us. So, a bad credit score shouldn’t put you off.
Mortgage arrears
Mortgage lenders don’t tend to view arrears fondly, but that doesn’t mean to say you won’t be able to secure a remortgage on your home. Lenders will be keen to hear the circumstance surrounding your arrears and why they happened, so be prepared to truthfully explain why you have defaulted on payments.
Lenders will always do their best to consider these reasons and, particularly if it is a historical arrea, they will tend to be more favourable. Some will even lend you more money to pay the debt off. Just remember to be open and honest about your debt, and recognise that you aren’t being judged for falling behind on your payments.
The lender has to get a 3D image of the information they are presented with on a credit file.
Mortgage paid off in full
You can, in certain instances, use your home as equity to receive a lump sum, even if you have previously paid your mortgage off in full.
Your circumstances and financial history will still be required to ensure that you can afford to repay this loan, but considering you’re mortgage-free, having repaid the first one, you have a large amount of equity and, therefore, have a potentially very good chance of acceptance.
How Loan Corp Can Help You Through The Refinancing Process
Many mortgage lenders will offer a whole host of reduced rates and fees in order to entice customers. However, finding the best rate can take a lot of time and become complicated if you don’t have a thorough, detailed understanding of the market.
Thankfully, we at Loan Corp are on hand to help you find the very best lender. We have access to much lower rates and deals that you might not normally see on the high street, and we take you straight to them.
We work as the middleman to negotiate the very best deals for you based on your circumstances and financial position.
Why not contact Loan Corp today, and find out more about how we can help you?
FAQs
How long does refinancing a mortgage take?
It can be difficult to determine precisely how long the entire process should take, but, on average, it should take no longer than 30 to 45 days to process and complete from the date you are accepted. However, it should be noted that the process can take up to 8 weeks in total in certain instances.
What is cash-out refinance?
A cash-out refinance means you use your property to take out cash to spend. While this increases mortgage payments, it allows you a lump sum that you can use to invest or fund whatever you wish, such as a new car or that all-important home improvement.
Can a credit report be affected by refinancing your mortgage?
Potentially, yes; depending on the lender you decide on, you may be subject to a check that will impact your credit score. Some mortgage lenders, however, will only conduct what is referred to as a soft check, which will not affect your score.
Should I remortgage with the same lender?
Staying with the same lender may have some noticeable perks, like potentially speeding up the process because you have built a relationship with them throughout your previous mortgage, and they have your details to hand. But it’s not always the sensible answer. You could find a cheaper deal with a different lender in many instances.
What if my circumstances change, and I cannot afford to make my monthly mortgage payment on time?
If you cannot afford to make any monthly payment on your mortgage, it’s important that you speak to your lender as soon as possible. Many lenders, once notified, will grant you a grace period in which you will have extra time to pay your monthly payment without it showing as a blot on your credit history in the future.
If you continue to struggle to pay back your existing loan, seek professional debt help as a priority, as your home or property could be at risk of repossession.
Final Thoughts
For some, refinancing a mortgage may sound like an intimidating and uncertain prospect, but with the right people by your side, it can be carried out in no time, 100% hassle-free. Using a broker such as Loan Corp will allow you to take advantage of a wide range of deals that you otherwise would not have been privy to.
Before committing to refinancing, remember to consider whether you can afford the new monthly payment and whether it is the most viable loan type for you.
Speak with a specialist mortgage broker who can help you refinance below: