Brokers report on new remortgaging trends
August 6, 2008
A number of mortgage brokers have recently reported a new trend with consumers that are looking to remortgage. According to some mortgage brokers many of those that are coming to remortgage are opting for longer term mortgages, taking the loan over a longer period of time such as thirty or thirty five years instead of the usual twenty five year term. This is helping many consumers to keep their mortgage repayments costs down at a time when household budgets are being affected by rising living costs, petrol prices, and food costs.
Brokers have said that another step that some homeowners are taking when remortgaging is to switch from a repayment mortgage to an interest only mortgage, as the repayments on these mortgages can be significantly lower. With an interest only mortgage the repayments are only made on the interest on the loan, and the actual loan itself remains untouched until the end of the mortgage term. Some lenders see these mortgages as higher risk.
One official said that it was better for homeowners who are struggling with their mortgage repayments to look at option such as these rather than to miss repayments and risk repossession action. He said: ‘The key thing is that a homeowner who needs to remortgage must feel they can afford the higher payments. If they cannot, it is much better to either extend their mortgage or switch to an interest-only deal. These are much better options than the alternative which is to struggle with their mortgage.’
However, another official said that consumers needed to be careful about opting for remortgaging over longer periods or to an interest only mortgage. He said: ‘If you are facing higher mortgage repayment, extending the term of the mortgage will reduce them but will increase overall costs dramatically. It should be treated as more of a last resort.’
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