The Issues You Should Expect To Face When You’re Remortgaging
There is still a lack of commercial mortgages and business finance in the property according to a new study from a leading UK property group. Jones Lang LaSalle’s 2011 Lenders’ Expectations Report has uncovered that lenders see a difficult twelve months ahead as the anticipate lending less in 2011 than they did in 2011.
Before 2008, lenders tended to offer 10 per cent mortgages which covered a property’s total value; high risk loans of up to 125% were not unknown. On the surface of things this was excellent news for first time buyers, because they were allowed to purchase a home without having to save for a deposit, and the extra funding allowed them to style, decorate, furnish and sometimes even extend the property.
But since the crash, lenders do not offer such contracts as they are too high a risk to them, so it is now essential to have a deposit of at least 10%, or even 15% for many lenders before they will consider the application.
Now, several years later, many lenders will still only agree mortgages up to around 75-80 per cent of the value of a property. This has had a negative effect on first time buyers, many of whom simply can’t afford to save up the deposit needed to buy a property.
And, it is not only first time buyers that are affected. Many households no longer qualify for the best remortgage deals because their current mortgage is at a higher LTV than most lenders’ limits. Falling house prices have left many people in a position where they can’t access the best remortgage rates with rival lenders.
The only two options now for homeowners who struggle to get a remortgage deal are to either wait for more equity to be built up in their property, or to wait for property prices to climb once again.
Whilst many people are struggling to switch their home loans, remortgage deals remain competitive for those people lucky enough to have a decent amount of equity in their property. And, it’s often the case that borrowers don’t even need to remortgage in order to benefit from a great deal.
Lenders should contact their clients prior to the existing deal coming to an end and grant borrowers a mortgage review. They will then discuss any current offers they have available. This can be done on information only or an advice basis and your lender must by law inform you about the difference between the two approaches.
If you have recently reached the end of your existing deal, it is certainly worth investigating the market and contrasting the different remortgage rates, although you should remember that legal costs for the legal paperwork will be added if you switch lender. This is extra to any arrangement fee that is incurred to secure the new deal, which is normally about £1,000.
Those who are unsure where to begin or who need assistance may find it easier to go to a mortgage adviser for help. They will charge for their services, but they are often paid by way of commission from the lender so you may not have to pay them yourself. A mortgage adviser can be invaluable when looking for a low cost remortgage deal.
Timothy Frodsham writes for JustRemortgages.com one of the UK’s top sites for the latest remortgage rates and best remortgage deals.