Re-mortgages
Re-mortgaging is a simple process when you know how. We have broken this
method down into four recommended steps so that you can start managing
your finances more efficiently and save thousands of pounds on your current
mortgage rate.
Step 1
Dig out the details of your current mortgage then ask yourself “What
type of deal do I have?” If it is:
a) Variable – you may re-mortgage to a better deal straightaway
b) Variable with a cash-back – you may have to repay the value of
the cash-back before you are allowed to switch mortgages
c) Variable with a discount, fixed rate or capped rate – you may
have to pay a redemption penalty to switch deals
d) Base rate tracker – you should be able to re-mortgage to a different
deal straightaway
e) Flexible – truly flexible mortgages should allow you to leave
when you want to with no penalty, unless you have a flexible fixed rate
or discount. But in many cases it will make sense to stick with a flexible
mortgage.
Make a note of how much it will cost to move your mortgage.
Step 2
Research the market for a cheaper mortgage and decide which type of deal
you want to switch to. Decide:
a) Do you want the security offered by a fixed rate, where you will know
exactly how much your monthly payments will be? Or if you are looking
for the security of guaranteed maximum monthly payments for a given period
of time with the opportunity of lower payments should variable rates fall,
a capped rate mortgage may be of interest. Whether you are interested
in a fixed or capped rate, do you know how many years you want the deal
to run for? This will largely depend on what you think may happen to overall
interest rates in the future (bear in mind that interest rates rise as
well as fall)
b) Are you looking for lower monthly payments in the short term? If so,
you will want to consider a discounted rate or possibly a short-term fixed
rate.
c) Do you want the opportunity to pay your mortgage off as quickly as
possible and save money in future interest payments? If so, shop around
for a flexible mortgage.
d) Are you confident enough to run all of your finances through the same
account for maximum financial efficiency? Then you should investigate
current account and offset mortgages.
e) Do you want a variable rate mortgage where the rate paid is determined
by the wider economy rather than the mortgage lender? Then go for a base
rate tracker.
Step 3
Make a note of:
a) Your current monthly payments
b) The monthly repayment cost of the new deal you have selected
Get in touch with your existing mortgage lender and:
a) Ask them to work out how much you will have to pay in early repayment
charges (if applicable)
b) Inform them that you are considering re-mortgaging. Tell them which
lender you are considering moving to and give them the details of the
new home-loan you are looking at. In a highly competitive market, your
lender should be keen to hang on to you business. So they may be able
to offer you a new deal to stay with them. But still make sure you shop
around as you could find something even more suitable.
Step 4
Calculate how much it will cost you to re-mortgage. Write down how much
the following will cost:
a) Early repayment charges (if applicable)
b) Application or arrangement fees (if applicable)
c) Valuation fees
d) Legal fees
It is vital that you weigh up all the upfront costs involved in changing
your mortgage against the potential savings that may be made.
Ideally, re-mortgaging should save you money straightaway, but if there
are costs involved that in changing your mortgage, it may take a number
of months to recoup the layout. And if you are liable to pay a very large
early repayment charge (they can run into the thousands of pounds), it
may not be worthwhile. But as a rule re-mortgaging may still make sound
financial sense in the longer term.
Click here for a comprehensive list of
remortgaging application websites.
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