Another Facet of Mortgaging
Remortgaging is not an opportunity for everybody. The competitive remortgaging requires you to have an exceptionally good credit record. You need to be very particular about paying your monthly installments on time; the repayments should not bounce in your bank account.
Any impairment in the credit record and bounce charges in bank statement represents irregularity leading to higher risk perception for the lender and there by, you receive a subprime loan which is likely to be a higher interest loan. Purpose of
subprime Remortgage is to rehabilitate the borrower. If the borrower becomes regular in satisfying his monthly mortgage repayments, there are chances that he would have access to standard / prime mortgage deal thereby reducing the cost of loan. Recently, the lenders have chosen to be away from
sub-prime mortgage as the market has had a very ill experience and this makes it difficult or rather impossible to remortgage.
Pitfalls in Remortgaging
The credit crisis had its serious impact on
remortgaging market. All lenders became very conservative as far as their LTVs are concerned. LTV stands for loan-to-value and it represents the percentage of loan given of the property’s worth.
For example, if value of property is 100 and loan given is 125 then LTV is 125%. So here it means that all the loans running at 125% LTV
mortgage were closed down. Now the situation was that borrower would not be able to get loan for more than the property value.
Consequently the equity infusion by the borrower has increased. It was a major problem for first time borrowers. The lenders are too strict with respect to their credit guidelines and providing only 95% loan-to-value at this time. So, those who have got good mortgage deal some years ago may not necessarily get a good deal in remortgaging due to such market situations.
