Refinancing mortgages

In the old days you typically stayed loyal to your mortgage lender for many years, often the whole mortgage term. It was more difficult for earlier generations to obtain mortgages and so this is entirely understandable.

The mortgage marketplace is much bigger and more fluid now, and borrowers are much less likely to stay with one lender for an extended period. Mortgage refinancing is usually triggered by a special deal coming to an end, such as a fixed term fixed rate offer or tracker deal.

Refinancing a mortgage is more difficult than it was several years ago because the choice of mortgages has contracted severely due to the downturn. However, there are increasing positive signs, with new mortgage products being introduced all the time.

When considering home mortgage refinancing, both you and your lender will have to consider a number of aspects of your financial situation, including any changes in personal or employment circumstances, the lending criteria of the particular mortgage products under consideration and the current value and loan outstanding on the property.

When refinancing a home mortgage - or you may be refinancing a second mortgage - it is important to consider the costs involved. These may include fees to the lender, property valuation fees and possibly a mortgage redemption penalty if you wish to leave your current mortgage while an early redemption charge still applies. With all the costs considered, you may find that although the interest rate for the new refinancing mortgage loan may initially look attractive, it is not financially worthwhile when you have taken the full costs into consideration.

Bad credit mortgage refinancing - where you obtain a more expensive sub-prime mortgage due to adverse credit difficulties in the past - is likely to prove more difficult than for someone with a good credit history. However, if you can demonstrate that your financial situation has improved, refinancing a mortgage loan could prove a significant reduction in monthly interest payments.

By Ben West