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Are you considering a home loan remortgage? There is a dizzying array of options available. If you are not familiar with all the possible options and their financial implications, choosing the right option for you can be an overwhelming process. Getting a home remortgage is not as overwhelming as it might seem, at first. But there is a good bit of work involved to fully understand all the possible options.

In this guide we try to make the learning process easier by highlight the important aspects of remortgaging a home loan. We also include a listing of remortgage calculators as well as information on some of the larger lenders offering remortgages.

Home loan remortgage is a decidedly UK term. It is conceptually the same as a home loan refinance. But, home loan refinance is a US commercial term, and should not be confused with the remortgaging process. The reasons people remortgage, or refinance, are pretty much the same. But, the types of loans used and other concepts are completely different.This article concentrates on home remortgage information as it is conceived in the UK and not the US. If you are a US based reader that is researching how to remortgage a property in the UK, Scotland, Ireland, etc, then you will get some great info out of this article. But, if you are looking for information on refinancing a home in the US, you will want to see our article on home loan refinance.

Home Loan Remortgage Basics

A remortgage is a process, and not an actual item. A mortgage is a legal claim on your property or home. In short, when you remortgage your home you are replacing the underlying loan of your current mortgage with a new loan. The proceeds of the new loan, in part or in whole, are used to pay off the original loan. Once the original loan is paid in full the original mortgage, original lenders legal claim, is released. The new mortgage (the remortgage) is then automatically executed. This entire process occurs automatically and is put into play when you have signed all the relevant paperwork for the remortgage. It is a fairly simple process, most of which you are not aware of.

Why Remortgage Your Home

There are any number of reasons that home owners may want to go through the home loan remortgage process. Here are some of the most common reasons:

1. To get a better interest rate: This is probably the most common reason for remortgaging a home loan. First time home buyers, borrowers with poor credit, or other adverse characteristic may have had to agree to an interest rate or unfavorable mortgage terms due to problematic aspects of their loan application.
2. To consolidate debt : Often borrowers recovering from a personal financial crisis like long term unemployment, poor health, etc, will have accumulated a large amount of debt to get them through the crisis. This type of debt is usually unsecure in nature and very expensive. Payments on this type of debt can be crushing financially. Although these borrowers have a large debt burden they often have equity in their home. A home loan remortgage is often the answer to these types of financial problems. Borrowers are able to consolidate their debt into one loan. Since the loan is secured debt the cost of carrying the debt is much lower and much more affordable.

   There are two large drawbacks to consolidating debt in this way. First, if you are not able to keep up with the new mortgage payment, you could lose the secured property. Whereas, before, when the debt was unsecure, if you did not pay your home was not in jeopardy. Second, unsecure debt is usually considered short term debt. Mortgage debt is usually considered long term debt. What this means is that you could end up paying more for the debt in the long run.

3. The discount or introductory rate for the mortgage is about to expire: Often banks or mortgage companies will attract borrowers by offering mortgages at discounted rates. These discount rates are often called an introductory rates. Introductory rates last only for a limited period of time, usually only a few years. After the introductory period of time the interest on the mortgage will increase to either a set rate as outlined in the loan documents or to what is called the standard variable rate (SVR). These rates are usually much higher than the introductory rate. A home loan remortgage under these conditions could save a borrower a good bit of money.
4. To extend their home, or create an addition, or remodeling.
5. Pay for their children’s college tuition.
6. Pay for a vacation.
7. Pay for a vacation home.
8. To start a new business

These are just some of the most common reasons people remortgage a home loan. We are all different and have different outlooks on life. So no one reason is good or bad. What matters is that you make a sound financial decision. Just because a mortgage broker s tells you that you can afford a certain remortgage product does not mean you really can. You need to do the math yourself. Be honest with yourself, can you really afford it. You need to ask yourself, does this home loan remortgage put me into a better financial position. Be honest with yourself, if it does not put you in a better financial position, then walk away.

If you are planning on using a home loan remortgage to fund a new business venture or an investment, you should really think twice about your decision. You could use your home if the new business venture fails or the investment goes south.

Common Remortgage Loan Types

There is a large number of loan options available for your home loan remortgage. Some of these options may not be available to you based on your credit score, work record, your homes loan to value ratio (LTV) and any number of other criteria the lender may consider important. If you have adverse credit, or don’t fit certain loan criteria, the lender may still offer these remortgage options to you. But, you will likely have to pay more in interest, fees, or both. Moreover, lenders trying to reduce their risk may make their offer with less favorable terms. You need to take, interest, fees, and the remortgage terms into consideration when you make your decision.

Most remortgage loan options are differentiated by how the interest rate and monthly rates are calculated. Here is a list of the most common options available for home loan remortgage:

1. Standard Variable Rate (SVR) is considered a benchmark it is used, essentially to compare other remortgages. One thing to consider is, if the interest rate of the loan option you are offered is above the banks SVR rate then it is not a good deal. The SVR rate is the rate you should use to compare all the other options you are offered.
2. Fixed Rate remortgage is where the interest rate is fixed for a period of time, usually two or three years. Once this period has expired the interest rate usually reverts to the SVR of the lender. With fixed rate, the longer the rate is fixed the higher the interest rate will be. This option is normally associated with higher fees.
3. Capped Rate remortgage option is very similar to the fixed rate option. A maximum interest rate is set for a predetermined period of time. Basically, this means that for the introductory period of time the interest rate on the loan will not exceed a certain percentage for a certain amount of time. But, if interest rates fall, so will the interest rate you pay and your monthly payments.
4. Discount Rate: has an interest rate that is a discount off the lenders SVR. What this means is that the interest you pay will rise and fall on a monthly basis but will remain below the SVR rate. As with the fixed rate option the longer the discount period is the smaller the difference between the loans interest rate and the SVR will be. Terms for discount rate mortgages are usually much more adverse, as they usually have higher fees.
5. Tracker Remortgage calculates interest based on the Bank Of England Minimum Lending Rate instead of the interest rate instead of being calculated as a percentage of the lenders SVR. Being fixed to the Bank Rate means that your loan is not set to your lenders SVR; which it is able to change at any time it wants.
6. Cash back Remortgages are exactly what they sound like. The lender will give you a lump sum. These loans are rarely discounted and are always pegged to the lenders SVR.
7. Drop lock: allows a borrower to convert to a fixed rate or discount rate remortgage without penalty during the initial period.
8. Flexible remortgages allow you to choose the types of monthly payments you would like to make. Normally, scenarios for calculating monthly payments are predetermined.
9. Offset remortgage is a flexible remortgage that is attached to a savings account held by the lender. The amount of interest owed is calculated on a daily basis and is determined based on the difference between the outstanding balance of the mortgage and the funds in the account.

What To Consider Before A Home Loan Remortgage

Before you call a lender or a broker that specializes in home remortgages there are several things you should know and consider.

1. Why are you remortgaging? Will a home loan remortgage make your financial situation better? Or, will it help you accomplish your goals in a financially responsible way.
2. Assess your current financial situation. – What can you actually afford to pay?
3. What is your current credit rating? – This will heavily influence the amount of interest you pay on the new loan. Can you clean your credit before applying for a new loan. If you can you should.
4. Assess your current mortgage. – Are there exit fees or prepayment penalties?
5. Plan ahead. – Don’t wait for the last minute to get the process going. When you rush you lose the advantage. Walking into a mortgage office and saying you need a quick remortgage will almost guarantee you will pay more in fees or interest, if not both.

Once you have honestly made these assessments, you will want to compare several deals before making a final decision. One of the biggest mistakes a borrower makes is only looking at one or two offers thinking that that is the best you can get. Make sure you compare similar remortgage offers. Once you have compiled several offers, contact your current lender and see if you can work out a deal with them. No one likes losing customers, even banks. It costs more money to attract new customers than it does to retain them. I think you will be surprised at how flexible your bank will be.

Any time you are thinking about making long term financial commitments you need to do your homework. Be ready to negotiate. Know your credit score. Know what you are able to pay. Understand the different possible loan options and their implications on your finances. Always read the fine print. It is your responsibility to understand what you are signing.

A Few Companies Offering Remortgages

I have listed a few of the larger companies offering home loan remortgages. They link directly to the company page outlining the remortgage products they offer. I'll add more as I come across them.

Santander Remortgages Tel.: 0800 389 9890	Alliance and Leicester Tel.: 0800 056 3254 Text: 0800 056 3250	Barclays Remortgage Email Contact Tel.: 0800 197 1081 Tel.: 0800 022 4022	Halifax Remortgage Tel.: 08458 50 37 05
HSBC Mortgages Tel.: 0800 169 6333 Text Phone: 1800 10800 028 126	Nationwide Remortgage Tel.: 0800 30 20 10 Tel.: 44 1793 656789	RBS Remortgage Tel.: 0800 068 7675 Tel.: 0800 404 6160	NatWest Remortgages Tel.:0800 096 9527 Tel.:0800 917 0789
Lloyd's TSB Tel.: 0800 783 3534