Taking Out a Mortgage Loan, UK Homeowners Can Save Huge Amounts of Cash on Interest Payments Every Month!
Mortgage Rates are at all-time lows, so it’s no surprise that refinancing applications have exploded lately. It may be a good time to refinance your mortgage if your lender has a new rate that is much lower than what you’re paying now and you expect to remain in your house for many more years. Your home is a valuable asset and the banks will allow you to borrow against the principal equity you own in your home. This can be released to you in favourable loan terms.
Mortgage Refinancing can also benefit you when you switch providers as most loan providers will calculate the best deal for you, saving you more money in the long term. The current provider you are with may want to make money from you by keeping you locked into a higher rate. Shopping around for better rates is always a good idea.
Furthermore, taking a loan out backed by your home is a much cheaper option than for instance using a credit card or personal loan when you need extra cash.
Mortgage Loans are also an excellent idea if you are planning on renovating your home. The loan will take into consideration the extra value you add to your home through carrying out renovations. This means you will be shoring up your principal whilst being able to borrow at cheaper interest rates. UK Homeowners that renovated their homes in a significant way, for example by building an extension and installing solar panels, were able to see an average of a 15% increase in value. Keep on reading to find more great info on Mortgage Loans.
Calculate the percentage of your current mortgage payment that is made up of principle and interest (P+I). If this amount is not shown on your most recent mortgage statement, subtract your monthly escrow payment from your total mortgage payment. Then, if you’re refinancing, calculate your new mortgage payment.
If you obtain a refinancing quote from a lender, this step is almost certainly taken care of for you. A mortgage calculator can also be used to calculate your monthly payment. To calculate your monthly savings, subtract your prospective new payment from your existing P+I mortgage payment..
You will most likely be given a new 30-year loan when you refinance your mortgage. In the meantime, the new mortgage will have a different repayment schedule.
Let’s say you’re five years into a £300,000 mortgage with a 4% interest rate. Your monthly P+I payment is £1,433, and you still owe approximately £271,000 of the initial total.
Assume you decide to refinance the remaining balance with a new 30-year mortgage at 3.25 percent interest and £3,000 in closing costs. You’ll have a new monthly P+I payment of £1,180, which will result in a £253 decrease in your monthly mortgage payments.
If you keep the original mortgage, you’ll pay £1,433 per month for the next 25 years, for a total of £429,900. When you refinance, your monthly payments will be reduced to £1,180 per month for the next 30 years. You will pay a total of £427,800, including the £3,000 refinancing fee.
So, refinancing will save you £2,100 in the long run. It is still the less expensive option, and it may be able to help you save money on a monthly basis. When it comes to the total payment over the life of the mortgage, the difference in monthly payments does not indicate a significant amount of savings.
The vast majority of home buyers apply for a mortgage through a single lender. It could be a bank with whom they already have a relationship, or it could be an internet mortgage lender with a reputation for offering competitive rates. But which one has the best loan terms? Regrettably, none of these approaches are always the best option. That is why it is critical to comparison shop for the best deals.
Mortgage rates are not standardised, which means that, while they fluctuate in response to market conditions, each lender sets its own rates and uses its own methods to assess borrowers. To cut a long story short, two lenders can offer a consumer vastly different mortgage APRs.
As a result, it is a good idea to apply for a mortgage refinance with a few different lenders. I typically advise submitting an application to five different lenders, including a large national bank, a local financial institution, a credit union, and an online-only lender. It will take a few more hours, but the extra time could save you a lot of money.