Save money in time for the Summer

April 02, 2014 | Posted by David Arstall

Remortgage Guide

If you’ve been with the same lender for several years, the chances are you may be paying much more than you need to for your mortgage.

Remortgaging to a different deal could potentially save you hundreds or even thousands of pounds a year, so it’s important to review your mortgage regularly to see if better deals are available elsewhere.

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What is remortgaging?

Remortgaging happens when you change the mortgage you currently have on your property, either by switching it to a new lender, or by moving to a different deal with your existing lender.

Why remortgage?

The main reasons people remortgage are to save money (by securing a lower rate of interest on the debt), or to release capital (or ‘equity’) from their property to pay for things such as home improvements, or to pay off other debts.

How you can save

When we first apply for a mortgage, most of us sign up to an introductory rate for a certain period.

For those on a tight budget, this is often a fixed rate deal, which charges a fixed rate of interest for two or more years. Alternatively, there are discounted deals. These offer a discount on the lender’s standard variable rate (SVR), again for a set period. So an SVR of 5% might be discounted down to 3% for two years.

Then there are tracker deals, which track the Bank of England base rate, plus a set percentage on top. The deal might promise to charge base rate plus, say, 2% – so if the base rate were 0.5%, the rate charged to the borrower would be 2.5%.

When your initial deal has ended

The majority of initial deals such as these only last for a few years. When they expire, homeowners will usually automatically be moved onto the lender’s standard variable rate, which will typically, but not always, be higher than the rate they have previously been on.

You don’t have to settle for the standard variable rate, however, or stick with the same lender for your whole mortgage term. Provided you aren’t locked into a deal which will charge you early repayment penalties if you change, you should be free to switch to another mortgage deal whenever you want.

Contacting us could save you thousands of pounds a year!!

Who should/shouldn’t remortgage?

If you are currently paying your lender’s standard variable rate, you could potentially save yourself a fortune by moving to a different deal. However, this won’t be the case for everyone, particularly those with very limited equity in their properties.

Over the past few years a lot of borrowers have remained on their lenders standard variable rate once their initial deal came to an end. This was due to the fact that the interest rates on high loan to value mortgages were higher than their current lenders standard rate. Recently, however, these rates have started to reduce.

Therefore, if your loan to value is less than 85%, please contact us to arrange a free review that could potentially save you money!!

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