Refinancing a Mortgage
It's very easy to sign mortgage papers and forget all about the details of the loan. As long as the monthly payments are made, many people don't give their mortgage much thought. However, as the economy fluctuates, mortgage rates do also, and substantial cost savings over the life of mortgage could be realized by refinancing.
In a typical refinance situation, the current mortgage is closed completely and a new one replaces it, with lower interest and possibly better terms. The new mortgage could be with the same lender or a different one, depending on which offers the most competitive plan and the borrower's situation. For those who are increasing the amount of the mortgage, it may be possible to renegotiate terms with the current lender.
Oftentimes, however, the process of refinancing means changing lenders because, as the new mortgage involves lower interest and better terms, the original lender would lose money in comparison. (Apparently losing the loan altogether is seen as better by some lenders.) In addition, while there are often some for closing a mortgage early, the savings for this type of large loan can be much more significant than these fees.
Because many homeowners will have built up equity over the course of the original mortgage, the replacement one could be for a larger amount, if needed, to make or pay off other debts--all with a lower rate and without taking on a second mortgage or line of credit against the home. Further, the terms of the mortgage could change, such as switching from a thirty-year plan to a fifteen-year plan. Oftentimes it is possible to obtain additional available funds with a smaller monthly payment than with the previous mortgage.
Applying for a new mortgage involves a lot of paperwork and perhaps some research. However, lenders like to take on new mortgages, so many will offer assistance in these areas. Moreover, with the increased use of technology, much information can be assimilated electronically, greatly saving time for everyone involved.
If lenders know you are shopping around, you may have some bargaining power with your loan broker to get the best deal. The good news is that lenders are in the business of competing for your business, so is certainly worth the time and effort. The bottom line is that a little bit of effort and research can result in substantial savings for the UK homeowner.