Buying a home is a very big decision that needs a lot of thought. Most experts agree that renting is a waste of money, but buying something as expensive as a house can be scary. Getting a mortgage with a variable rate can save you money at first when interest rates are low. But if interest rates go up, the amount of the payment can go through the roof, making it hard for people to pay for their homes or even cause them to lose them through foreclosure. The best solution would be to refinance with a fixed rate remortgage loan, even if the interest rate is slightly higher than what is being paid now. You need to know all of your options because you will probably be paying for your home for at least 15 to 30 years.
During the recent housing boom, when interest rates were low, people were able to buy a home with a monthly payment that they could afford. The loan was set up so that the interest rate would go up at some point in the future if the prime interest rate went up. The exact date and amount would vary from loan to loan. When interest rates started to go up, many people were afraid they would lose their happy home.
Some homeowners who moved quickly were able to refinance their home and lock in a fixed rate remortgage. Their monthly payments may have gone up a little, but they were still within their means. But some homeowners kept making the higher payments even after they couldn't afford them anymore. When they tried to refinance, they couldn't because they had a bad credit score. If they go to an alternative loan site, they might be able to get a loan, but the interest rates and monthly payments are often higher as a penalty for missing one or two or four payments.
Many credit companies add extra fees to loan agreements that can make the homeowner's interest rate go up if they pay late or don't meet other obligations. For instance, if a credit card company reported a late payment, it could cause the home loan's interest rate to go up, even if the payments were always made on time. Many people don't read this warning in the loan documents, and by the time they do, it's too late. Some people lose their homes because of the higher rate and higher payments.
Even if the payments on a variable rate mortgage seem low, the best deal is with a fixed rate remortgage because the homeowner can count on paying the same amount every month for the life of the loan. If you keep an eye on interest rates, even people with bad credit might be able to get a better deal with a fixed rate and get out of other debts if they can take the equity out of their home.
Getting a fixed-rate remortgage will cost money because the steps to do it are the same as when you bought the house the first time.
