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How to Remortgage? – Switching your Mortgage to Save Money, Raise Cash, Reduce Monthly Payments
Many people change their mortgage provider every year, either to save money, or to raise cash.
What should you think about when changing lenders? Are you able to reduce your monthly payments?
Some estimate that over half of all borrowers are paying more than they need for their mortgage each month.
They are possibly paying the lender’s standard variable mortgage rate. There will be lower rates available from other providers. Because of the fees that lenders charge, make sure that what you gain through a lower interest rate you are not losing through higher charges.
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What help is Available?
Lenders employ advisers within the branch who usually may only be able to recommend their own products. But there are a host of independent mortgage brokers who are free to advise you from the whole of the mortgage market. Or you could look yourself.
Check the terms and conditions of your existing mortgage as these will tell if you are tied-in to your mortgage deal or if there are any redemption penalties – sometimes phrased as early repayment charges.
If you do have penalties, you must decide if it is worth switching to a different rate or stay put until the penalties have expired. You may feel a sense of loyalty towards the company, however, most lenders do not reward this loyalty with a reduction in rates.
So, you should shop around to see if you can get a better deal.
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Releasing Money
In addition to you reducing your monthly payments, you can also use remortgaging as a way of releasing some equity that has built-up in your property’s value. It is important to be cautious if you are tempted to release equity. Although is may be much cheaper to borrow through your mortgage the debt is secured on the property which means that if you can not keep up with additional payments, you could risk losing your home.
How do I know what is the Best Deal for me?
Broadly there are five types of deal: fixed, capped, tracker, discounted and flexible.
If you want the certainly then the fixed rate is for you and is usually fixed for between 2 and 5 years.
Tracker and discounted loans offer a reduction off the standard variable rate for a set period.
If rates rates rise then so will yours and vice versa. A capped-rate loan will set a limit on the rate you will pay. If rates rise, your payments will not go above that level. However, if rates fall below the cap so will your repayments. Flexible mortgages allow you to overpay and underpay when you choose and without penalty. This is ideal for people who have fluctuating incomes or who want to clear their mortgage early. An increasing number of fixed, capped and discounted deals have more flexible features as well.
Your home may be repossessed if you do not keep up repayments on your mortgage.