There haven’t been many reasons to celebrate since March 2020, but every cloud has a silver lining, and the impact of the pandemic on the economy has caused lenders to lower their rates. As a homeowner, you want to take advantage by remortgaging and reducing your monthly premiums.
The longer the low rate, the less you’ll pay in the long-term, so it’s a no-brainer. It’s also little wonder that 13 million borrowers can now use the technique to their advantage, and have been doing for the past couple of months. You plan on doing the same, yet you need to understand that remortgaging isn’t a walk in the park.
As with any contract, you should thrash out the fine details before signing on the dotted line to limit any potential damage. If you’re not sure how to do it, here are four essential steps you want to consider taking.
Analyze How Much You Own
This applies to the percentage of your home that you own. Remortgaging gives you plenty of options, but they might not be suitable if you don’t have enough equity in your home. For the penny to drop, you have to figure out your loan-to-value ratio, or LTV.
It’s pretty easy as all you need to do is divide what you owe by the current value of your home. Then, you can multiply the number by 100 to get the LTV. For instance, you would own 25% of a property if you owed $150,000 and it was worth $200,000, and your LTV would be 75%.
Not only does it affect the suitability of a deal, but it also has a bearing on your new home loan, which is why it’s imperative to keep this figure in mind when remortgaging.
Check Your Credit Rating
A credit rating is what lenders use to assess your eligibility for a loan. As a rule, the higher it is, the greater the chances of being accepted. On the flip side, a low score could result in a rejection, and that’s not ideal, not when it leaves a mark on your record. Plus, it’s not as if you can’t evaluate the strength of your rating beforehand.
Firstly, calculating your score is an extra layer of protection that prevents you from jumping in too soon and ruining your opportunities. Secondly, it’s a motivator to push you along. A low rating isn’t the end of the world since you can add to it with simple and accessible hacks, such as restructuring debts and paying punctually.
Also, don’t assume that having no debts is healthy. It isn’t as it doesn’t give lenders any information. Therefore, taking out a credit card could help you remortgage your home in the long-term.
There’s a temptation to wait until the end of your current deal before remortgaging. What’s the rush? You already have a good deal, and you have another one lined up when it runs out within a year or two. Perfect. Except, it isn’t ideal, not when it could expire.
Switching early lets you take advantage of the offers on the table at the time, which is the best way to do it because you can’t wait and hope for better terms forever. You can also reserve rates with some creditors, but this is a different matter. After all, if a better deal pops up during the waiting period, you want to exploit it.
Typically, it’s smarter to switch mortgages as soon as you find a suitable option, regardless of how long is left on your deal. That way, you won’t be stressed out by the market and you’ll love your home again!
Find A Broker
When all of the above sounds like too much, it’s easy to throw in the towel and admit defeat. You have a mortgage, which is better than nothing, so it’s pointless trying to improve your finances. Leveling up is never counterproductive, even when it appears as if it’s a waste of time.
In the mortgage world, brokers are around to do the heavy lifting. Yes, they charge a fee, and hiring one adds to the costs, but their job is to save you money in the long-term. With their expertise and contacts, a broker could slice a considerable chunk off of your premiums, leaving you with more disposable income.
In short, the money they save makes up for the expense of using a broker in the first place.
Remortgaging is on the cards for millions of people in the US and around the world at the moment. To snag an incredible deal, you have to be wary of the pitfalls and avoid the traps at all costs.