Guest post by Darren Robinson Mortgage, a Barrie mortgage broker.
Do you think re-mortgaging your home is a good idea? It can be – if by doing so you can reduce your monthly repayments and/or the length of your mortgage. A remortgage can also free up necessary cash if you've lost your job or just need some extra money for expenses.
Six Steps to Re-Mortgaging
Your re-mortgaging will require you to take these six steps; it's a good idea to write down your responses to the following so you have them on hand:
1. Evaluate whether a re-mortgage is necessary
Sometimes it is, and sometimes it isn't. That depends on your circumstances. While re-mortgaging may lower your monthly payments to give you extra needed cash, you may actually lose money in the end if you pay too much for re-mortgaging costs. If your current mortgage is almost paid off, for example, re-mortgaging will probably cost you more in fees than it will save you in interest.
2. Figure out exactly what you want to accomplish when you re-mortgage
What do you want to do with the re-mortgaging? Have a little extra cash for some necessary spending? Reduce your payments on a month-to-month basis? Shorten the life of your loan?
When you determine exactly what you want to accomplish, you won't get sidetracked by questionable "offers" that look good, but won't benefit you.
3. Don't forget to check your credit report
The Council of Mortgage Lenders introduced stricter rules in 2014 April such that some people found they couldn't get the mortgage they wanted; either they didn't qualify at all, or for a smaller amount than anticipated. This affects not just home buyers, but those that want to re-mortgage, as well.
To qualify for a re-mortgage under these new rules, your credit report should reflect upon you positively.
4. Figure out whether you can afford it
While a re-mortgage can often make meeting your monthly payment easier by reducing it, that doesn't always happen. If, for example, you have a current fixed rate mortgage and your new mortgage will have a variable interest rate, that interest rate could go up so that you'll ultimately pay more than you are now. In addition, the costs and fees associated with re-mortgaging will mean extra expenses that you may not have thought of previously.
5. Find your best deal… and then approach your current lender asking for a match
Shop around and speak to lenders to determine who will give you the best deal. You can also use a mortgage broker, which is a good idea if you're self-employed or have bad credit so that you're not the "ideal" re-mortgage candidate. However, some lenders don't offer their best deals through brokers, or may charge higher fees, so you should only use one if necessary.
Once you've found your best deal, you should approach your current lender to see if the lender will match that deal. Most lenders will want to keep your business rather than hand you over someone else, so they'll often agree.
Once you've found the best re-mortgage option, complete an application for the lender. You'll need to have your credit checked and may be asked to give other documentation, such as proof of income, just as with your original mortgage application. The lender may also ask to survey your property so that the value of your home is accurately assessed. If the lender finds everything satisfactory, you'll be given a formal mortgage offer, including any terms and conditions attached to the loan.
Follow these six steps when considering the option of re-mortgaging your home, and make the process as smooth and easy as possible.