Quick Look at Remortgage Types
Fixed Rate Remortgages
Fixed rate remortgages are always popular. Fixed rate remortgages are exactly what they sound like, they have a rate that is fixed and is locked in to a specific rate level. It will not change month to month, it is always the same. This is a remortgage that is very good for those homeowners that want to know exactly what they will be paying month to month. The fixed rate is good for as long as the deal is good. For instance if a remortgage is a 2 year fixed rate remortgage then it will have that interest rate for two years. At the end of the term a homeowner will have to get a new remortgage deal or their interest rate will revert to their lender’s variable rate.
Tracker or Variable Rate Remortgage
A tracker or variable rate remortgage is a remortgage that has an interest rate based on the standard base interest rate set by the Bank of England’s Monetary Policy Committee (MPC). Depending on the rate of the tracker it will follow (or track) the interest rate of the MPC by a percentage more than the standard base interest rate. This rate can fluctuate up or down according to the Bank’s interest rate level but the change for the homeowner is usually annually. In the event the interest rates lower after a homeowner gets a tracker then they will pay less if rates rise then they will pay more.
Interest Only Remortgages
Interest only remortgages are self-explanatory. This is a remortgage where the monthly repayments are allocated only towards the interest part of a loan. Because a homeowner is only paying on the interest the amount of the principal debt is never being paid off so the original debt amount remains untouched.
Flexible Repayment Remortgages
A flexible repayment remortgage is a remortgage that allows the homeowner or borrower to make overpayments to the loan. In doing so they are paying off more of the debt without paying more interest since the overpayment is allocated to the overall debt amount or principal. In making the overpayments the homeowner can borrow back over-payments and when needed can make an underpayment or take a payment holiday.
Most other remortgages do not allow overpayments without a penalty so this is a remortgage that allows a homeowner to pay off their debt quickly and save a lot of money in the process by not having to pay as much on interest.
Capped & Collard Remortgage
A capped remortgage is basically a variable rate remortgage that has a fixed upper rate as well as a fixed lower rate. The variable rate can never rise above the cap nor fall below the collar limit. This is therefore a variable rate remortgage that allows a homeowner to know the maximum and minimum their repayments will fall within.
Long Term Remortgages
Long term remortgages are remortgages that fall into the 25 to 30 year terms. This allows the debt to be carried off over a long range of time and thus it reduces monthly repayment amounts when compared to shorter term remortgages. Interest rates associated with long term remortgages are usually higher than those found with a standard 25 year term or shorter.
Discount Rate Remortgages
Some remortgages are offered with an initial discounted rate. This is a discount on the normal variable interest rate. At the end of the discount period the interest rate will revert to the lenders variable rate.
Cash Equity Release Remortgage
A cash equity release remortgage allows a homeowner to borrow money from their built up equity in their home. The equity is released as cash to the homeowner. Equity is built up over time as a homeowner pays on their mortgage debt. The equity is basically the value of a property minus the debt owed on the property. The cash can be used for anything the homeowner wants and is not subject to limitations for use.
Cash Back Remortgages
Cash back remortgages are remortgages that have attached to them an offer by the lender to receive incentive cash back once approval for the loan is granted. The cash can be used to cover improvements to the property or other expenses associated with the home so it is often considered a very good bonus opportunity. Cash back should never be the sole incentive for a remortgage as there are other things such as fees, interest rate, etc. that should be considered as well.