Borrowers have the right to enter into a new contract with the current lender or another lender after the end of the mortgage period and to extend it. These new terms may include different rates or other factors. This is called a contractor remortgage.
But the question is, when is the right time for contractors to get remortgage? Is contractor remortgage advice necessary?
In this case, borrowers may be able to save thousands of pounds by paying lower rates. In general, remortgage contractors can be a good option if they meet the following conditions.
The first section looks at five ideal ways to get a contractor remortgage. In the following, the cases where getting a contractor remortgage is not considered a suitable option are mentioned, and in the final section, the contractor remortgage advice is discussed.
Contractor Remortgage Advises: Five Ideal Modes
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If the rates dropped
Financial specialists here usually refer to the “one per cent” rule. The law means that if the rate drops to (at least) one per cent, the contractor’s remortgage is worth it. In this case, the contractors will make significant savings by reducing the mortgage rate.
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Find a mortgage with better terms
A mortgage with better terms can be a lower rate mortgage, a different mortgage (fixed or variable), or another mortgage. In any case, this new mortgage should help reduce rates or reduce mortgage fees.
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Pay the mortgage instalments earlier
If the contractors’ financial situation changes, and they can repay the mortgage earlier than the amortization period, the contractor remortgage can lead to significant savings in the long run.
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If the mortgage term is nearing the end
The mortgage period can be between 6 months and 10 years. If this period ends, borrowers will have to renew their mortgages. Although remortgage contractors through different banks or lenders can bring in many other fees, they may save in the long run.
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If more savings can be made by accessing the owner’s equity from the property
Access to a larger share of the property to invest or earn and settle other debts at a higher rate using a contractor remortgage can be valuable.
Contractor Remortgage Advises: Five Inappropriate Modes
In some situations, contractor remortgage is not a good option or even legally impossible. But what are these situations?
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If you have a high-ratio mortgage
If you’re current share of the property is less than 20%, your mortgage is called a “high ratio”. Insurance companies usually insure high-rates mortgages. These types of mortgages do not allow the contractor to remortgage.
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There is still a long way to go before the mortgage term expires
If you are looking to terminate a mortgage before the contract period, it may cost the borrower much money. In this case, you may have to pay various fees for administrative work, evaluation, etc. But if your financial situation has changed, the rate has dropped, or you are looking to buy a new property, contractors remortgage before the end of the mortgage period can be a good option.
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If the bank fines the borrowers early
Most lenders charge fines on borrowers who pay the instalments earlier. However, some banks allow borrowers to pay a certain percentage of the subsequent instalments sooner. If your financial situation improves, and you can pay up to 15 to 20 per cent of your original debt each year without an early payment penalty, you may pay thousands of pounds less in interest, and this amount may be able to cover all of the contractor’s remortgage fees.
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If you do not have the necessary affordability
Note that the contractor remortgage comes with costs. Contractor remortgage costs include fees for application, appraisal, inspection, legal affairs, early payment penalties to the previous lender, and more. You can pay part of the contractor’s remortgage costs with a mortgage. However, some lenders consider all of these fees as part of the cost of a new mortgage. If this is the case for the new lender, you must have enough money to pay for it.
Four Important Remortgage Contractor Tips
One of the most common mistakes many applicants make when it comes to contractors’ remortgages is to sign the form without doing the necessary checks. The fact is that there may be other better options for borrowers that can save them several thousand pounds. Here are some tips for getting a remortgage contractor with better terms:
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Get started sooner rather than later
It would help if you did not defer consideration of other options until one or two days before the mortgage extension agreement with the current lender. It would help if you had more than the luck to succeed in the business. This way, you can talk to more lenders and get more information. As a result, you can choose the best one from the available options.
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Compare existing rates
Rate is one of the most important considerations in a remortgage contractor. If you look at the different lenders’ rates, your hand will be more open to negotiation. Sometimes even with lower lenders rates, you can get a better offer from your current lender.
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Change your lender if necessary
It is possible to transfer the mortgage to a new lender after the mortgage term expires. However, you have to be careful about this. Just because another lender offers a lower rate does not necessarily mean it is a better option for you. It would help if you considered other costs, legal fees, and your status. However, if you plan to remortgage through another lender, you need to consider various conditions. After calculating all this, you may conclude that moving a mortgage to a new lender will save you more money.
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Read the terms of the remortgage contract carefully
Some applicants’ sign the contractor without reading the contractor’s remortgage clauses. Later, these applicants may be harmed due to ignorance of some of these clauses. Be sure to check the details of the remortgage contract carefully. See how much of the payment amount is used to repay the principal and interest on the remortgage.
Also, your financial situation may improve, and you may want to pay some instalments sooner. For this reason, you should see what the contract says about the early payment of instalments. Under some clauses of the contractor’s remortgage contracts, you may have to pay a fine for paying the instalments early.
AWS Contractor Remortgage Advisory Service
The AWS Mortgages advisors, with careful planning, perform the contractors’ required activities and steps to obtain a remortgage. AWS Mortgages advisors also work with many lenders and can make comprehensive comparisons of products on the market. They are familiar with getting contractors remortgage from application to completion and are fully aware of the lenders’ measures.
AWS Mortgages specialist advisors know which lenders are best for contractors. They identify lenders who are familiar with the contractors’ employment status and assist contractors in getting a remortgage.
AWS Mortgages contractor remortgage advisors have high bargaining power due to their extensive business activities with lenders and provide reasonable rates and conditions for contractors. Therefore, using the advisory services of AWS Mortgages advisors can lead to significant savings in time and cost of getting remortgages for contractors.
Talk to AWS Mortgages specialist advisors to benefit from their years of experience providing contractor remortgage advisory services.
