A mortgage is taken out to buy a property and a remortgage is a new mortgage that replaces it.
Only homeowners can obtain a remortgage or a mortgage as they are both loans that need the asset of a property.
This all lead to mortgages and remortgages being very readily advanced as they are secured loans, secured on the equity of the property
No matter what debts a homeowner has to pay each month on credit cards, personal loans, etc. the most important debt that he must pay is his mortgage as there is nothing in life more important than keeping a roof over your head.
Food and shelter are the most importaant aspects in life.
This certainty that mortgage lenders had that the mortgages and remortgages they advanced being repaid faithfully each month , and being certain that no one in their right mind would apply for a mortgage or a remortgage that they could not comfortably pay back.
All this lead to both remortgages and mortgages being granted often in rather a loose manner, with people in fact being granted mortgages to buy a bigger house than they could actually afford and the situation was the same with remortgages.
Perhaps the mortgage and remortgage lenders badly misjudged human nature thinking that the facts provided on their application forms were in fact accurate, when in fact this was often not the case.
It was usual for self employed applicants to declare their own income without providing any proof of earnings when arranging a remortgage or mortgage.
Many self employed, anxious to buy a more luxurious property than their real net profit could possibly buy were prone to augmenting their profits to buy the home of their dreams.
A self employred applicant wrote his net profit on a letter head, and sometimes the true earnings were not stated.
Some took out a remortgages to pay Inland Revenue and VAT arrears.
This often lead to mortgage arrears and we are witnessing this at present.
Now when applying for a remortgages or mortgages the prospective borrower if self employed must produce at least an accountant's letter or even two years full acounts.
Many homeowners are in a situation of having mortgage arrears through no fault of their own due to having taken out a home loan that they could comfortably afford at the time, and having been made redundant they can no longer afford.
On applications in the past, many would be remortgage borrowers under declared the amount they spent each month on financial outgoings such as food, utility bills, etc, and as a direct result, borrowers must now produce three months bank statements to categorically prove what they spend each month on these items.
All this tightening up of criteria should help make sure that the person applying for a remortgage or a mortgage can afford to comfortably afford it.
Author Resource:
Champion Finance are certainly one of the longest established finance brokers in the UK, if not THE longest established. They arrange whole of the market remortgages, mortgages and secured loans. Debt advice and debt help is also available to help clients to find debt solutions.Therefore if you require a secured loan, debt advice or aremortgage go to Champion Finance.
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