Homeowners looking for mortgage loan refinancing in Britain may achieve a better cash flow by lowering the amount of money they need to pay out each month. It may also be possible to lower payments by refinancing at a lower interest rate. Before you enter into a refinancing agreement there are some things you need to take into consideration.
Bad Credit Mortgage Loan Refinancing in Britain
It has been estimated that residents of the United Kingdom are more than 1 trillion GBP (United Kingdom Pounds) in debt. They also have the dubious distinction of having one of the highest rates of credit card debt worldwide. Several lenders now offer mortgage products designed to help those who are in debt to get back on track financially.
These mortgage products may carry a higher rate of interest than a standard mortage, but it is possible to get the same goodies that other mortgage customers enjoy. Be sure to ask about flexible repayment options and free legal fees.
A homeowner who also has a significant amount of non-secured debt from credit cards or loans may be able to improve cash flow by refinancing their home. If they have owned the home for several years the value of the property may have increased over time. The equity in the home (the difference between what the property is worth on the current market and the amount of the existing mortgage) can be used to put a larger mortgage on the property. The debts are paid out of the new mortgage and the homeowner makes one smaller payment each month.
This plan has the potential to work well, as long as the homeowner doesn't start overspending on credit cards after they have been paid off. The homeowner needs to also be aware that the overall cost of refinancing in this way will be greater over the long term. Interest on the loan will be paid over a number of years, which greatly adds to the overall cost of borrowing.
Refinancing for Other Purposes
Morgtage loan refinancing in Britain is not only used when someone wants to consolidate debts into a lower payment. Homes may be refinanced to free up cash for other purposes such as paying for a wedding, making improvements to the property, taking a vacation, and so on. Parents may want to contribute to the cost of their children's education, and refinancing their home may be a way to accomplish this goal. Another situation in which a homeowner may need to look at refinancing is when a couple divorces. Rather than sell the home and split the proceeds, one person may want to refinance the home and buy out the other one's share.
Get Mortgage Advice
It makes sense to gather as much information as possible before making a final decision. Make a list of all the debts you are interested in consolidating including the interest rate you are currently paying. Ask the lender to provide you with a figure representing the total cost of borrowing the money over the term of the loan.
If you get a new mortgage through a mortgage broker you will be charged a fee. Depending on the circumstances, you may be charged a flat rate or a percentage of the amount borrowed. This figure could be as high as two percent of the loan amount.
An individual interested in mortgage loan refinancing in Britain needs to consider their entire financial situation before taking this step. If they feel that refinancing their home makes sense, a number of lenders stand ready to offer mortgage products to fit their needs.