Looking for a Refinance Deal: 5 Things You Need to Know
Are you in the process of looking for a refinance deal on your house? Perhaps you want to refinance to release equity for paying down debt. Or maybe you are just looking for a better deal than you have now. Regardless of your reasons, refinancing property has both advantages and disadvantages.
Refinancing is essentially switching from one mortgage deal to another. A lot of people are doing it for a lot of different reasons, ranging from debt consolidation to paying off an interest-only mortgage. It might be an effective way for you to release the equity in your property as well.
If you have been considering a refinance deal, there are five things you need to know first:
1. You May Have to Switch Lenders
It might be possible to refinance with your current lender as long as they offer refinance deals. Not all do. In such a case, you would have to switch lenders in order to release your equity. This means paying off your current loan early through a new loan from a different lender.
Switching to a new lender may incur early repayment penalties from your current mortgage holder. If your current lender does offer refinancing options, you might ask if refinancing can be done without incurring any extra fees or charges.
2. You Will Extend Your Indebtedness
A refinance deal designed to release equity is, for all intents and purposes, a new mortgage for the entire value of your home. Refinancing means you are starting over in the repayment process. It also means you will be extending your indebtedness accordingly. This is not necessarily a bad thing if you have enough equity to make a refinance deal financially advantageous. But you do have to keep this in mind.
3. Joint Owners Must Give Consent
A homeowner who is the sole owner of his or her property can refinance without anyone else being involved. The same is not true for joint owners. If you own your property with someone else, even if that person is a spouse or partner, dual consent is required. Joint owners both have to put their signatures on the paperwork. In most cases, both will also be subject to the MMR and other lending requirements.
4. Refinancing Could Protect Your Credit
One of the advantages of using a refinance deal to consolidate debt is that it could protect your credit. For example, let us say you are on the brink of not being able to pay your bills due to high-interest credit cards and personal loans. Your problems have not yet resulted in late payments or notes on your credit report, but they could if you don't do something. Releasing the equity in your property could make it possible for you to pay off those debts before they start showing up as part of your credit history.
5. You Can Clear Debt without Anyone Knowing
When you refinance a property, the only public record available is the deed registered by the Land Register. Only you, your bank, and any joint owners will know that you have refinanced in order to clear other debts. This is important to some people for reasons that could be as varied as looking for a new job to starting a business.
The typical refinance deal is supposed to offer property owners good rates and terms while also releasing enough equity to help the individual meet certain financial goals. As with anything, getting the best refinance deal is a matter of shopping around and comparing multiple offers.
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