Plan Now or Get Into A Bit of Bother
The terms that you agree when you go into a refinancing arrangement can be crucial in determining whether you will ever be able to pay the loan and under what terms you choose to pay the load. There is a particular concern about the interest rates.
This article will highlight some of the issues you need to be weary of when trying undertake a refinancing process. Research can be helpful, whether you use an online source like lovemoney, consulting a mortgage magazine or talking to an independent financial advisor (IFA). It is important you do not make any rash decisions. If you do not exercise appropriate caution you can end up losing your home and being saddled with an unfunded debt.
The Things to Watch Out For
- Be wary of the interest rate. Try to establish the fluctuation and the variation over time. You might be induced into a seemingly good deal but then after a certain period you go back to a very stringent system when you have already made a commitment. Even the fixed interest deals are not always to your advantage. You could end up being locked into a fixed interest arrangement to such an extent that you are unable to take advantage of low interest deals when they come along.
- Remember that the banks have their own self interest. Do not assume that because they are being polite and pleasant to you, it follows that they will always have your interest at the heart of their operations. If they are given a choice between making a good deal for themselves and a bad deal for you, they will always choose the former.
- Take advice from people who have knowledge of both the refinancing system and the banking system in general. There are a number of financial advisers who are attached to the banks and they have a system to ensure their impartiality. However you also have the option of getting your own private financial adviser. The costs might be somehow high but they could save you from financial ruin, in case if something went wrong.
- The contractual elements of the refinancing package can be quite challenging to understand, especially if you do not have any sort of legal background. That is why you need to have some sort of advice so that you can mitigate some of the vagaries of the contract.
- Remember that refinancing will put you further in debt with your lender and they may change the rules to make them even more stringent than they were before. If you have the opportunity to improve your payment terms, you will need to make sure that you take that opportunity. It is rare that you will have the chance to renegotiate a loan agreement.
- Look at the distress clauses in the payment terms. You need to make allowance for the fact that even with the best will in the world. Ask what options you have for renegotiating for better terms in the loan contract and how far the lender can go in terms of trying to recover the money. This is not about anticipating failure but about recognizing that you need to protect yourself for every eventuality.