Remortgage Regulars
When you're thinking about a remortgage you have a number of options you'll want to weigh. Let's look at the choices:
* Standard variable rate (SVR) remortgage -usually this is the most costly rate, typically with a low temporary rate up front as a promotion and then a transfer to the standard variable rate once that time period has passed. Most homeowners on an SVR will try to remortgage as soon as they can.
* Fixed rate remortgage - This typically has a set interest rate for a predetermined time period, after which the lender's current SVR kicks in. This mortgage or remortgage provides a firm monthly payment for the initial loan period, although subsequently may not be cost effective. This mortgage, just like the SVR, is something a homeowner often seeks a remortgage from.
* Capped rate remortgage. Whether your first mortgage or your remortgage there are pluses and minuses on a cap rate mortgage. You have the security of knowing that for the initial period of two to three years the highest rate you will pay. But the cap may in fact be higher than if you had chosen a fixed rate mortgage or remortgage.
* Discounted rate remortgage - with this mortgage or remortgage you have an initial period where you pay a predetermined percentage off your lending institution's SVR. The discounted time period can vary, but in general the longer the discount period, the less the discount. Once the discount period is over, you'll pay the bank's SVR.
* Tracked rate remortgage - This guarantees that your mortgage or remortgage will mirror the base rate of bank mortgages. If the rate decreases so will the amount you pay each month on your remortgage.
* Drop lock Tracked rate remortgage - this tracker mortgage or remortgage offers you the option to make a change to a fixed rate remortgage during your initial time period without any penalty for early repay. This drop lock remortgage can be a handy way to take advantage of low base rates while making the change to a secure fixed rate remortgage when it's advantageous to do so.
* Cash back remortgage - While the mortgage rate on this loan is usually your financial institution's SVR, this remortgage offers you a large upfront payment for whatever your lump sum needs might be. You might use this, for instance, to pay the deposit on a new home, to begin home improvements or to buy additional furnishings.
Many mortgages or remortgages offer optional features such as flexibility. If your remortgage is flexible you can make some changes in the payment you make each month if your finances require or allow that. You might be able to overpay or under pay, make a lump repayment or take a short reprieve from monthly payments. The latter is most commonly used if the homeowner has some one time large expense, such as the purchase of a new vehicle or to pay for a wedding.
Overpayments are usually the most common flexible remortgage feature. Underpayments and reprieves (also known as holidays) are allowed based on your payment history and credit.
Another remortgage or first mortgage feature is currency. With a current remortgage, your bank account and your remortgage become one account. You can even set up a direct deposit of your salary into the account to pay your remortgage automatically. The interest is a daily calculation.
You can also choose an offset feature for your remortgage, which simply means that the balance on your remortgage is offset against any money you have in any other account with that lending institution, such as a savings or checking account.
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Robert Michael is a writer for Domus Property
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