Your mortgage is a long-term commitment, and it is easy to think that once you have arranged a deal which lets you buy your home, you may as well stick with it.
This is not true, and there are currently some very good reasons to take a fresh look at your homebuying arrangements – and spring clean your mortgage.
How can you get a better mortgage?
When you bought your house, you probably tried to get the best deal you could. But if a few years have passed, it is probably not the best deal any more.
There are many reasons for this. Your home has probably appreciated in value, meaning that you would be potentially borrowing a smaller proportion of its value. The smaller the loan to value ratio, the better the rates that may be available. If the fixed or introductory discounted rate on your mortgage has ended you will be transferred to your lender’s standard variable rate (SVR) likely to be higher than the rates available on new mortgage deals.
There may also simply be better deals in the current market. There are low introductory rates, and you can now fix your mortgage for as long as ten years to protect yourself from potential rate increases.
If there are better deals to be had, you will need to re-mortgage. Remortgaging means switching to a new mortgage deal – either with the same or a different lender. You take out a new mortgage, and use it to pay off the old one, and hopefully end up with less to pay each month.
It is a routine transaction, but there is more to choosing the right deal than simply finding the lowest rate.
The mortgage with the lowest rate may not actually be the cheapest deal. There are some hidden costs that you need to factor in to understand the real costs so receiving expert advice from one of our Independent Mortgage Advisers could be essential.
Arrangement fees: These can add £1000 or more to the cost of a mortgage. If you are borrowing a large amount, it can be worth paying a larger arrangement fee in return for a low interest rate but on smaller loans it may be better to opt for a higher rate in return for a lower set-up fee.
That kind of extra makes little difference with repayments over a 25-year mortgage, but it could mean paying more if you re-mortgage again at the end of a fixed rate period in a couple of years’ time.
Legal fees: Even if you are remortgaging there will be legal and valuation costs. These will be lower than if you were buying your home but will still include a valuation survey and a solicitor’s bill. Some re-mortgage products include a free valuation and legal work – which can again make a higher rate deal cheaper than one with a lower rate and no extras.
Early repayment charge: Most mortgage lenders make an early repayment charge during the introductory period, depending on the lender this charge could be payable after the introductory rate has ended. Getting out of a two-year fix for example, might not be worthwhile because of the penalty.
Exit fee: When you re-mortgage, you will be charged an exit fee by your current lender to cover the administration costs. Costs vary depending on the lender. It will be stated on your original mortgage offer. The typical amount charged is around £295, but in many cases it could be less.
Finding the best deal for remortgaging
There are hundreds of mortgage deals available, and there is no single best deal that is right for everyone. This means that searching the market to get the deal that is right for you demands specialist help.
At Continuum, we not only have a team of mortgage experts, we have a state-of-the-art technology based system that lets us search the entire lending market. It means we can access the best rates and ensure the re-mortgage deal we find for you really can be the best one for your needs.
If you are ready to spring clean your mortgage, call us for the help you need.
Your home may be repossessed if you do not keep up repayments on your mortgage.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.