The Different Types Of Remortgage Loans

The Different Types Of Remortgage Loans
With fluctuations in mortgage interest rates leading to an
all time low, remortgaging property is becoming an
increasingly popular option among borrowers. Remortgaging
helps to lower interest rates and allow using the increased
value of the home for needs requiring urgent cash or for
alternative investment options. The variety of available
remortgage products fall under any one of the following
categories.

Standard Variable rate remortgage (SVR)- This mortgage is
based on the Bank of England's base lending rate. Usually
all mainstream lenders like banks and other financial
institutional set their standard variable rate or SVR at 2%
above the Bank of England's base lending rate. This means
if the base rate is 5.25% the lender's SVR would be 7.25%.
The SVR follows the base rate as it fluctuates up and down.
However by shop around a borrower with a good credit rating
is sure to get a better rate for his remortgage.

Discounted variable rate remortgage- In such a mortgage a
lender, to lure a borrower, provides a discount on the SVR
for a specific period, usually between 2 to 5 years, after
which the rate bounces back to the SVR. For example if the
SVR is 2 % above the base rate, the discounted rate may be
just 1.5 % or 1.25% for the discount period. The rate would
fluctuate with the base rate but borrower will be paying
less than the SVR during the set period.

Fixed Rate remortgage- This is a type of mortgage where the
interest rate remains fixed for an agreed period before
reverting to the SVR. This period generally ranges between
1 to 5 years but could be longer depending on the
particular mortgage deal chosen. The advantage of this type
is that the borrower knows exactly what he has to pay as
repayment every month with no surprises in store as in the
case of other mortgage types. On the downside, it could
result in a higher interest rate if market rates go down,
as the rate agreed to remains fixed. Additionally, early
redemption of the mortgage may invite a significantly
higher penalty.

Capped rate remortgage- Capped rate remortgages are
supposed to give the best of variable and fixed rate deals
with two drawbacks. One, they carry a relatively higher
rate of interest and two, they are saddled with a one-time
administration fee. This is because they give the borrower
a better cushion against rising interest rates. Capping the
upper limit ensures that the borrower does not pay more
than the capped rate even if the rates cross the capped
level also allowing him the benefit of lower interest rates
in case interest rates drop.

Flexible remortgage- These allow the borrower to adjust the
repayments to suit his circumstances. The borrower can pay
more for early clearance of the mortgage if he has extra
cash and save money. Or, if there is a paucity of funds,

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Graham Bradlington is the marketing manager for Quickly
Finance Limited, a company which specialise in Fast track
Secured Loan & Remortgage applications for homeowners.
Quickly Finance is 100% independent & can search the whole
market for the best deals... quickly! For more info:
http://www.quicklyfinance.com