Move a home loan ... to give yourself a lift
YOUR mortgage is likely to be your biggest monthly outgoing if you are a homeowner, so it pays to ensure you are on the best deal.
Interest rates have never been so low and there are big savings to be made by remortgaging, particularly if you are paying your lender’s standard variable rate.
This is the default rate which most mortgages switch to once an initial offer has expired, and can be as high as 5 per cent. Even if you are on a fixed rate, discounted rate or tracker deal, it might still pay to switch – if the savings you make outweigh any early repayment charges.
Phil Smith, 59, and his wife Sharon, from Melton Mowbray, Leicestershire, remortgaged to a five-year fixed rate loan with TSB Bank just before Christmas. He also changed the type of mortgage he had.
Factory worker Phil was increasingly worried that part of his £122,000 mortgage was arranged on an interestonly basis, which meant that when it matured in 11 years’ time, he would have to pay it off.
So he approached TSB about switching to a low interest, fixed-rate loan and moving the whole loan on to a repayment basis, where monthly payments slowly reduce the outstanding mortgage balance.
‘We were able to halve the mortgage rate we were paying to 2.09 per cent and cut the term of the loan to ten years. In 2027, we should be mortgage-free,’ says Phil. The couple did not have to pay an arrangement fee for the fixed-rate deal.
As with any financial product, make sure you search across the whole market for the best loan offer.
An independent mortgage broker can prove useful, showing you the best deals. And they can prove their weight in gold if your financial circumstances are slightly unusual, or you are self-employed, which can make obtaining a mortgage harder.
Remember to factor in fees attached to any new mortgage deal. Some of the keenest priced loans carry high fees.
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IF YOU have come to the end of a special deal, always check what your existing lender is prepared to offer. Some are keen to keep their customers, and obtaining a new mortgage product from them will prove less onerous than switching to a new lender.
FIXING now will protect your finances from any future rise in interest payments. An increase in interest rates is now more likely than a further cut in the Bank of England’s benchmark base rate, which is currently 0.25 per cent.
REMORTGAGING will require you to lay bare your financial soul. Be prepared to hand over copies of your bank statements. Any new lender will want to be happy that you have the financial capability to comfortably pay the interest and repayments. THE more equity you have in your home, the better rate you will get.