As a home buyer you may be under the impression that after you’ve moved into your house or flat, and locked in the mortgage rates, you’re set for the entire mortgage term. This may not always be the best idea.
Some homeowners pay over the odds for their mortgages, and they could potentially save money by getting a cheaper deal for their existing home loan.
Watch out for SVRs…
As you approach the end of your existing tracker, fixed-rate or discount mortgage deal, you’ll be moved to the lender’s standard variable rate (SVR).
The drawback with SVR mortgage is that your lender can change the interest rate at any time, irrespective of the changes in the Base rate. So, you face the uncertainty of being unsure of when your repayment may change.
Plus, if you choose to stay on the SVR mortgage, you may find yourself paying more for your mortgage every month, than if you were to shop for a more competitive offer. For example, with many discounted and fixed rates available at approximately 1.1-2.5%, paying an average SVR of 4.56% means that you’re potentially paying much than more than you need to each month.
Fortunately, there’s another option: remortgaging.
Remortgaging to secure a lower interest rate
In essence, remortgaging is switching from the current mortgage to a new deal or lender, usually at a lower interest rate.
It’s important to mention here that every situation is different and you have to evaluate the costs of remortgaging to determine if it’s a wise financial decision for you.
As a rule of thumb, remortgaging is a good idea if you can reduce the interest rate on your existing loan by at least 2%. In fact, many borrowers say that 1% savings are still enough of an incentive to remortgage.
So, when you’re offered lower interest rates, consider remortgaging to shorten your mortgage term and pay significantly less in payments.
Moreover, if you’re currently paying an “interest-only” mortgage, and the loan is for less than 75% of your home value, remortgaging is certainly worth considering.
Furthermore, since SVR mortgages don’t have a lock-in period, you’re free to move on to a more competitive deal without an early repayment charge for switching.
How a mortgage broker can help with remortgage
A good broker ensures that you get the best possible mortgage rates for your circumstances.
Plus, when you move to a new lender, remortgaging requires applying for a new application as well as paperwork requirements and affordability checks. A mortgage broker can do a lot of this heavy lifting, including chasing through the mortgage offer.
Our mortgage advisers not only help clients with the mortgage process, they also help first-time home buyers with their mortgage offers!
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
‘SOME BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY