Remortgage: Basic Terms
We briefly reviewed remortgages in our remortgage overview. However, lets define the notion of remortgage from a very basic perspective. Remortgage deals or refinance arrangements, like a mortgage, consist of two major legal documents. One is called the note and the other is called the mortgage.
The note specifies the amount of the home loan, the mortgage rates (or remortgage rates) and other conditions of the agreement. Of course the best remortgage will be the one that includes, among other things, the lowest interest rate. The mortgage is a document that gives the lender legal claim to the property in the event the home loan cannot be paid back. The property being remortgaged is typically used to secure the loan. The lender is referred to as the mortgagee and the borrower is called the mortgagor.
Typically installments are made over the course of 20 to 30 years. A portion of the payment goes toward the principal (actual payments made towards the loan) and a portion goes toward the interest rate that was charged. Most all loans are structured so that you pay a significant amount of interest up front and then less as the loan begins to expire.
If the mortgagor cannot repay the loan then a foreclosure may take place. Foreclosure is a legal procedure whereby the lender takes over the mortgage. A property may have more than one mortgage. If foreclosure takes place the second mortgagor will get nothing until the first mortgage is satisfied. There are solutions for a bad credit remortgage. If you have bad credit you may be able to conduct a credit repair. In addition you may qualify for a bad credit loan.
There are two major mortgage loan types. These are called conventional loans and federal loans. The federal loans include FHA (Federal Housing Agency) and VA (Veterans Agency) which protect the mortgagor against loss to the lender. Conventional loans do not.
During periods of inflation prices tend to soar and lenders may miss opportunities to loan money at higher interest rates. During these times lenders may attempt to structure loans so that the missed opportunity is minimized. They accomplish this by charging the mortgagor points. Points represent fees lenders charge during the loan process as a result of inflation. When a lender grants a loan over 25 to 30 years the money that get back is worth less than what they lent. Hence, points tend to help them recover some of this money.
Lenders also have other methods for structuring remortgaging loans so that the remortgage is more attractive to them. Examples of these include graduated payment loans and variable rate mortgages. The former is where the mortgagor makes lower payments initially and then the payments rise later into the future. The latter reflects the situation where interest rates rise and fall and the borrower is liable for payments reflecting these rates.
Categories: Remortgage | 
Tags: Conventional loans, Federal Housing Agency, foreclosure, lender, mortgage, mortgagee, mortgagor, points, Remortgage, Veterans Agency | 
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Qualifying for a Mortgage
Like most other processes, the remortgage or mortgage process for home loans requires certain criteria. The mortgage lenders generally have several requirements or variables that they use to measure and validate the applicants. Most lenders have three major factors. These are (1) your credit score, (2) the down payment and (3) your debt ratio (income versus debt).
The first step in mortgage refinance is pre-approval, also called pre-qualification. This is where the applicant goes through a type of pre-screening to determine if there is any credibility before the process begins. Once this process is complete the applicants major factors (as mentioned above) will be evaluated along with numerous other variables. If all is satisfactory a “clear to close” will be given. However, keep in mind that the lending institution can evaluate your credit history the day of the close to make sure no bad rating has been incurred since the pre-approval stage.
Your credit score may be one of the most important factors in applying for a mortgage or remortgage. Credit scores run from about 300 to 800 or more. The lower you score the higher your risk, the higher the interest rates and the higher the down payment you will need to make. Conventional loans with standard rates will generally be given to individuals with scores ranging from about 600 – 700. Individuals with scores over 700 generally have access to some of the lowest rates as a result of their creditworthiness. If your credit score is below about 600 your going to be asked to provide a substantial down payment and you will be charged a higher percentage remortgage rate. This is particularly so with the bad credit remortgage folks.
Your credit history evaluation will involve a number of factors including mortgage and/or rental history, car payments and other installations, credit card history with respect to late payments, county or court claims against you, prior foreclosure or bankruptcy, other collections or judgments, liens, student loans and any repossession history. If you are divorced some institutions may insist on seeing your divorce decree. The latter serves to define who the buyer is and who will be making the payments. Finally, lending institutions will inquire as to the depth of your credit history, the amount of debt, how long you have carried the depth and other compensating factors.
When checking your credit history the lenders will forward the information to credit bureau. The credit bureau will conduct a type of due diligence on your information. Hence, it is important to always provide accurate data to these companies as they house your credit profile. A report from the credit bureau will then be made to the lending institution to assess your creditworthiness. Part of this evaluation includes, of course, your ability to repay the debt. The latter is assessed by evaluating your past history in making monthly payments to your creditors.
You have the right, however, to dispute any claim by the credit bureau regarding your credit history. It is then up to the credit bureau to resolve the claim. Most claims are resolved in two weeks or less.
If you would like to know additional information regarding the criteria associated with mortgage qualification check out the video shown below or watch it here on YouTube.
The video discusses and provides information regarding the credit score/history, which was discussed above in this article but then adds information regarding the down payment and debt-to-income ratio. In addition, several tips and resources are suggested. As always, it is a recommended practice to secure a good remortgage broker.
Categories: Remortgage | Tags: Conventional loans, credit card history, credit history, credit score, debt ratio, mortgage, Remortgage | No Comments »
Debt Consolidation
Debt consolidation via a home remortgage can be very beneficial and practical. The basic idea is simply utilizing the equity in your home. Home equity is simply the difference between the value of your home and what you owe. Given that you have equity might qualify you for a remortgage deal at a lower interest rate. If you can refinance your home at a lower interest rate you can lower your payments. If you utilize some of the equity, your monthly payment could be higher but significantly less than all of the monthly bills you might be paying. The notion of utilizing the equity in your home via a remortgage is actually a secured debt consolidation loan and it can save you a bundle, especially if you have a number of high interest credit card loans.
One of the striking advantages to remortgage offers is the notion that, in most cases, you cannot deduct the interest that you are paying on your credit cards, however, in addition to having one lower overall monthly payment, you can deduct the interest on your remortgage loan. Also, you do not have the hassle of dealing with numerous creditors. If you have bad credit, this option can actually help you repair this image. Another thing to keep in mind is that as time goes by your home will generally increase in value further. This means you home equity will continue to grow. And finally, getting into a more viable financial state can start the process of helping you towards a more debt free future.
In some cases you might get as much as 85-90% of the equity in your home which you can use to pay off debts. This will vary by mortgage lender. Of course good credit is always going to be a plus towards obtaining the loan. In addition, debt consolidation loans are viewed as higher risk home loans and therefore there may be various other fees and charges. But in the end it will save you much more money than most any situation involving high interest payments.
To be secure in the future once you have successfully completed the best remortgage you can for debt consolidation one should be keenly aware of debt management. There are many specialists in this field and contacting one could be very beneficial. Also, it is a good idea to obtain a mortgage broker to get the best remortgage deals as they will keep a level of clarity and transparency in updating you during the process.
Categories: Remortgage | Tags: bad credit, Debt consolidation, debt consolidation loan, debt management, Home equity, lower interest rate, remortgage broker, remortgages, remortgaging, secured debt consolidation loan | No Comments »