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A variable rate re-mortgage is basically a loan which is issued by a mortgage lender and is secured against a part of a borrower’s property. The variable rate part of the mortgage is the actual rate of interest which the lender uses to charge the borrower interest. This amount is calculated by using the Bank of England’s base rate. This base rate is at present at one of the lowest points that it has ever been at and therefore the variable rates which are set by mortgage lenders are also at their smallest rate. This is because of the fact that mortgage lenders have to set their interest rates around the rates of the Bank of England.
As these variable rate re-mortgages generally have lower rates of interest, it has made them a lot more of a popular choice to borrowers in more recent times; though, the disadvantage is that the re-mortgage rate could be changed at any period. If the Bank of England chose at any time to increase their base rate, the variable re-mortgage rate would increase as well. Therefore, although the borrower will typically be paying less interest for their re-mortgage, if the interest rates were raised, their monthly re-mortgage repayments would also rise due to the instability of interest rates. Though, the benefit is that if there was a decrease in this base rate, the variable re-mortgage rate would also decrease which in turn would decrease the borrowers monthly re-mortgage repayments.
When a borrower has found the property that they want to buy, it is generally better to do a bit of research concerning the variable rate re-mortgage which is available to them. With the launch of internet banking, banks are continually competing against themselves through the web as well as in the high street branches. There are also professional loan companies who have been set up on the internet whom are also targeting this re-mortgage market using their own products and deals.
If the quantity of information that is available seems too daunting and the borrower is unsure of where they should start their research, it would normally be worth them checking with one of the financial advisers that are available first. They are able to use the advisers that can be found in their local banks branch. They will also be able to talk to these advisers regarding all of the relevant details regarding these mortgages which will in turn supply them with a better insight of the finer details for this form of re-mortgage.
When a borrower is applying for one of these variable rate re-mortgages, they could be eligible to borrow around 90 to 95% of their property’s value depending on which lender and product that they have chosen. Their application will basically be based on their income of which if they are a sole applicant, can potentially be about 3.5 times their salary or more which will also depend on which lender they use. If however they are applying in joint names, they may potentially get a loan from the lender of around 3 times their joint income or higher.
All re-mortgage applications are based on the borrowers’ credit history. Each financial institution will perform a mandatory credit check on the borrower who is applying for the re-mortgage. This will provide the mortgage lender with the ability to calculate the risk to them when they lend money to the borrower to secure the re-mortgage. They will also look at the personal details of the borrower, for instance monthly outgoings, their employment history and of course any outstanding debts that they may have.
There is generally no redemption penalties that come with a variable rate re-mortgage, if the borrower moves and wants to re-mortgage to another mortgage lender or if they repay their re-mortgage earlier than the given term, they will not be charged for this. |
