Are You In Need Of More Room For Monthly Cash Flow
Refinancing can change your monthly payment and make it either higher or lower, depending on the terms you choose. If youre in desperate need of some breathing room in your monthly budget, it could make sense to refinance and pay a lower monthly rate, so long as you use that freed up cash towards your goals.
A huge mistake would be to refinance, lower your payment, and not have a clear plan of what youll be doing with those new freed up dollars each month.
What Are The Risks And Costs Of Refinancing
Make sure you factor in fees before you decide if refinancing is right for you. You need to pay appraisal costsOpens a popup., legal fees and possible prepayment charges. If you switch lenders, you may have to pay a discharge fee. Also, be aware that taking out home equity comes with risks. For example, if you switch from a fixed-rate mortgage to a variable-rate mortgage, you may deal with rising interest rates and higher monthly payments in the future.
Life Insurance For Mortgage Protection
Peace of mind for your home
Whether youre a first-time buyer or only have a few years left on your mortgage, make sure your home is protected if you die or become terminally or critically ill.
Barclays Life Insurance is underwritten by Legal & General Assurance Society Limited. When you select Get a quick quote, well take you to Legal & Generals website to complete your application securely. Terms, conditions, exclusions and eligibility criteria apply.
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How Much Will It Cost To Complete The Refinancing
Depending on your lender and your loan terms, you may pay as little as a few hundred dollars or as much as 2% to 3% of the new loan value to complete a refinancing. If its going to cost you $3,000 to complete the refinance and it will take four years to recoup that money, it may not make sense for you.
Alternatively, if you can refinance and pay only $1,000, and have no plans to sell anytime soon, its very likely worth paying that $1,000 to save over time. In addition, some lenders allow you to roll your closing costs into the amount of the loan, so you dont have to come up with money out of pocket for closing costs.
Can You Get A Mortgage On Furlough
If you are relying on furlough income during the pandemic, you can still apply for a mortgage but your choice is more limited.
In Money Mentors guide to getting a mortgage on furlough, we explain:
- How furlough can affect your chances of getting a mortgage
- Which mortgage lenders are accepting applications
- How they treat furlough income
- What happens when you are back at work
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Work Out How Much You Can Afford
To find out how much you can afford to borrow use our Mortgage affordability calculator
As a starting point, you must work out if you can afford the additional borrowing.
Use our Budget Planner to see if you can afford the repayments.
If you believe you can afford this route, follow these steps:
The Costs Of Refinancing
Refinancing a home usually costs 3% to 6% of the total loan amount, but borrowers can find several ways to reduce the costs . If you have enough equity, you can roll the costs into your new loan . Some lenders offer a no-cost refinance, which usually means that you will pay a slightly higher interest rate to cover the closing costs. Dont forget to negotiate and shop around, because some refinancing fees can be paid by the lender or even reduced.
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Mortgage Loan Insurance Premiums When You Switch Lenders
You may have to pay a new mortgage loan insurance premium when you switch lenders, if:
- the amount of your loan increases
- you extend the amortization period
If you already have mortgage loan insurance on your existing mortgage, tell your new lender. This may help you avoid paying mortgage loan insurance premiums twice. Ask your existing lender for a certificate number. They can provide you with a copy of the insurance certificate when you receive your mortgage contract.
You need to sign the registration documents that are part of your mortgage contract. You may have to meet with your lawyer or notary.
How To Cut Costs
If your current mortgage is a fixed-rate deal, it could be worth waiting for your term to end so you are rolled on to your lender’s standard variable rate. While SVRs usually have high rates and are uncompetitive, they come with no early repayment charges if you decide to terminate your deal. Fixed-rate mortgage deals usually last between 2 to 5 years, so depending how far into your term and how desperate you are for a move, consider holding off until you are on an SVR.
If your new home is of a similar value to your current one, porting your existing mortgage would be a wise option. You probably wouldn’t need to take out an additional loan to cover any higher costs, and therefore wouldn’t need to pay any more arrangement or valuation fees.
You should always shop around and compare the market before deciding whether to port your current deal or remortgage. Weigh up the savings you will make through any reduced rates with the costs of early repayment charges and arrangement fees.
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Types Of Reverse Mortgages
- Federally Insured Reverse Mortgages – Known as Home Equity Conversion Mortgages
- Proprietary Reverse Mortgages
- Single Purpose Reverse Mortgages
When finding a lender remember:
- Be suspicious of anyone claiming that you can own a home with no down payment
- Seek out your own reverse mortgage counselor
- Never sign anything you do not fully understand
- Make sure the loan is federally insured
Remortgage With A New Lender
You can find a mortgage for your new home with a different lender. You could use this to pay off your existing mortgage, or you can also pay for it by selling your home. This could be beneficial to you if house prices in your area have risen significantly since the time you bought your current home. However, there will often be early repayment charges and exit fees for quitting your existing mortgage mid-term. On top of this there may be arrangement and valuation fees on your new mortgage. Make sure you include these in your calculations when deciding if switching lender is the best move for you.
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Can You Add A New Spouse To An Existing Mortgage
You just got married and now you want to add your new spouse to the mortgage or title of your home. Putting your spouse on title is a simple process. All you need to do is have a grant deed prepared, sign it in front of a notary public, and then have it recorded.
Thereof Can you add someone to an existing mortgage? But adding a co-borrower to an existing mortgage isnt an option, as lenders issue those loans based on the creditworthiness and financial circumstances of the person named on the loan. Instead of adding another person to your mortgage, often the best option is simply to put the deed in both names.
How can I add my wife to my mortgage? If you want to add someone to your existing mortgage you need to contact your mortgage lender to arrange it. Theyll send you documents to complete, it will be a similar process to a new application, so theyll need to verify affordability, credit history and identity of the person you wish to add some to the mortgage.
Beside this, Can I add my spouse to my house? The easiest way to grant your spouse title to your home is via a quitclaim deed . With a quitclaim deed, you can name your spouse as the propertys joint owner. You will need to have the quitclaim deed notarized with the signatures of you and your spouse.
Cost Of Porting To A Cheaper House
|EQUITY LUMP SUM||£50,000|
|Table notes: All figures are simplified for illustration purposes and do not include fees and other costs associated with buying and selling.|
Table notes: All figures are simplified for illustration purposes and do not include fees and other costs associated with buying and selling.
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Im Interested In Debt Consolidation
The value of your home can also help you consolidate high-interest debts, like credit card debt or personal loans.
This is typically done using a cash-out refinance. You tap your home equity, use it to pay off existing debts, and then effectively repay them to your mortgage lender at a much lower interest rate.
This can be a very smart way to save money on interest payments. But experts warn that using a cash-out refinance for debt consolidation has risks, too.
Remember, the new loan is secured against your home. So if you run the debts back up and cant make loan payments, there could be a risk of foreclosure.
One Mortgage Two Or Three
- One remortgage – If there is enough equity in your primary property to release funds to clear any existing mortgage balance and buy a second property in full, you will be left with one remortgage tied to your first property only.
- Two remortgages This is the more usual situation, where there is enough equity in the primary property to replace the first mortgage and release funds enough to serve as a sizeable deposit on a second. You will be left with a larger mortgage on your first property and a second mortgage on your new property.
- Three remortgages In these corner cases, you would apply for a second charge remortgage on the primary property, leaving the original mortgage in place. The money released in this way would then be used as the deposit for the third mortgage used to buy the second property.
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How Does A Second Mortgage Work
The equity you have in your home is a valuable asset, but unlike more liquid assets like cash, it isnt typically something that you can utilize.
A second mortgage, however, allows you to use your homes equity and put it to work. Instead of having that money tied up in your home, its available for expenses you have right now. This can be a help or a hindrance, depending on your financial goals.
Specific requirements for getting approved for a second mortgage will depend on the lender you work with. However, the most basic requirement is that you have some equity built up in your home.
Your lender will likely only allow you to take out a portion of this equity, depending on what your home is worth and your remaining loan balance on your first mortgage, so that you still have a certain amount of equity left in your home .
To be approved for a second mortgage, youll likely need a credit score of at least 620, though individual lender requirements may be higher. Plus, remember that higher scores correlate with better rates. Youll also probably need to have a debt-to-income ratio thats lower than 43%.
Buying From A New Home Builder
Buying a home already under construction from a new home builder is an option for those who wish to buy a brand new house, but dont want to go through the motions of planning and construction themselves. This is common when a new neighborhood or housing community is in the midst of being built. Essentially, youll be able to have some say in how the house is going to look, but will be doing a lot less of the grunt work. Youll still have other responsibilities, such as picking the lot you want to purchase, choosing the layout and the finishes, and what additions to install if any.
Just the same as purchasing a vacant lot, selecting a qualified builder is also important for both your finances and the future of your new home. Make sure that your builder has a good reputation for constructing quality homes. Any legitimate builder will also provide you with a warranty, usually for one year, for their work and the building materials used during the homes construction. Once you have the warranty, read it carefully so you know exactly what parts of your house it covers. And, with that warranty, most contractors will include a homeowners manual so that you can keep up with the basic maintenance of your new home in the years to come.
Want to compare the price of buying a house to building one from the ground up?Check out the cost of homes in your city.
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Getting A Residential Mortgage If You Already Have A Buy
You can take out a residential loan if you already have a buy-to-let mortgage. The deposit for a residential mortgage is typically lower than whats needed for a buy-to-let mortgage.
However, youll need to carefully check to see if your affordability levels will pass all lender checks before applying for another mortgage.
Can I Get A Mortgage If Im Still On Furlough Leave
You can still apply for a mortgage if you are on furlough leave, but your choice of deals has been reduced because of your employment situation.
The Coronavirus Job Retention Scheme, commonly known as furlough, was introduced by the government on 20 March and will last until the end of September.
- People on furlough have financial support of up to 80% of employees salaries capped at £2,500 a month.
- Employers have the option of topping up the remaining 20% of your salary.
- From July 1, employers will have to pay in 10% of their furloughed employees salaries and the government will cover the remaining 70%.
More than 11 million jobs have been furloughed. Workers in the travel, leisure and hospitality and retail sectors have been worst hit.
- Find out more: Seven tips on how to get a mortgage in this current climate
At the start of the pandemic, mortgage lenders would still accept applications from borrowers on furlough income, allowing them to use 80% of their basic salaries.
But as the months rolled on banks and building societies began to tighten the rules of who they would lend to leaving borrowers to ask, can I still get a mortgage if Ive been furloughed?
The good news is, yes you can.
You have three options:
1 Get a joint mortgage on furlough
- Find out more: How to get your first mortgage
2 Get a mortgage with furlough restrictions
3 Get a mortgage on furlough with your own bank
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Should You Mortgage The House You Own
Owning your home outright provides a valuable equity cushion, and its exciting to no longer shoulder the burden of monthly mortgage payments. The good news, though, is that you dont have to sell to access your equity.
Between a cash-out refinance, a home equity loan, or a home equity line of credit, homeowners can pull cash from their equity and use the money for many different purposes.
Make sure you understand the pros and cons of each type of financing, and choose the best one for you based on your specific goals.
Increasing My Mortgage What Is A Further Advance
A further advance is when you take on more borrowing from your current mortgage lender.
This is typically at a different rate to your main mortgage.
This route can make sense if:
- your lenders further advance is competitive
- you dont want to remortgage or switch lenders.
You can spread your payment over a long term and your interest rate should be lower than a personal loan.
But always check the market to see if you can get a better deal before committing.
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Know Your Homes Equity
The first piece of information that you will need to review is to work out how much equity is in your home. If your house is now worth less than it was when you began your mortgageknown as being in negative equitythen it doesnt make sense to refinance your mortgage.
At the end of the second quarter of 2021, consumer confidence had risen to its highest level since the beginning of the COVID-19 pandemic. This means that, according to property information provider CoreLogic, many homeowners have seen large increases in their equity. A recent report shows that U.S. homeowners with mortgages have seen their equity increase by 29.3% year over year , representing a collective equity gain of more than $2.9 trillion, and an average gain of $51,500 per borrower, since the second quarter of 2020.
This means that the number of homeowners in negative equity has decreased significantly in the last year. In the second quarter of 2020, 1.8 million homesor 3.3% of all mortgaged propertieswere in negative equity. This number decreased by 30%, or 520,000 properties, in the second quarter of 2021.