Whether you are a first-time buyer or home-mover, you will be faced with some particularly difficult decisions this spring about what to do with your mortgage.
Alliance and Leicester can help you remortgage today!
Should you be switching?
Yes if…
Your mortgage is a large one the larger the loan, the more likely you are to save interest. The more you are borrowing, the more interest you are paying, so even a 0.3 per cent switch could save you hundreds. For example, someone with a £100,000 mortgage could save up to £200 a month.
Youve had the same mortgage for 10 years. The last decade has been great for mortgage deals and for product development. There are a lot more lifestyle products available that could be more suitable especially if you are an older borrower. Plus its extremely likely your property has doubled in value.
Find a new mortgage deal
Maybe, if…
Your circumstances have changed. Downshifting, changing job, becoming self-employed or starting a family could necessitate a mortgage switch. It may be that you need to switch over to a more flexible loan such as an offset mortgage where you can overpay, take payment holidays or underpay.
And maybe not…
If youve recently remortgaged. All remortgages will have an arrangement fee alongside legal and valuation costs, which could amount to far more than you bargained for. Borrowers shouldnt switch too frequently as it ends up being really costly.
If youre consolidating debts again. A lot of people remortgage after Christmas. Thats when their credit card bills start to kick in. But people need to remember that a credit card is an unsecured debt, and a mortgage is a secured one. If you default on a credit card the worst that can happen is that you get a county court judgment. If you default on a mortgage you can lose your home thats the difference.
Alliance and Leicester can help you remortgage today!
The cost of remortaging
Penalty charges
Unsuspecting switchers who are still in the initial period of, say, their two or three-year deal could also be liable for hefty penalty charges if they change mortgage lender. The charge can be up to 3 per cent of the loan.
If you are swapping to a cheaper deal with the same lender you may escape a penalty charge, but some deals even have penalties which run beyond the end of the initial deal tying you into a lenders high standard variable rate.
Find a best-buy mortgage
Arrangement fees
Also known as a booking fee, application fee or administration fee, these up-front charges are on the rise and range from £60 to thousands of pounds.
Some lenders will as with penalty fees charge a percentage of the loan instead; for example, a 1.5 per cent charge will cost someone borrowing £150,000 a fee of £2,225.
But fee-free remortgaging deals, with legal and valuation fees included in the deal, are increasingly common. Another option is to roll your fees into your loan to avoid paying them up front. However, you will pay interest on these fees, which is more expensive over time.
Timing the switch
Give yourself at least three months to set up your remortgage.
This means that the day your mortgage deal expires all the paperwork is in place, so you will never find yourself on the lenders standard variable rate.
But if the prospect of switching every two years fills you with horror, you can always go for one of the new lifetime rates.
Compare and buy mortgages
Melanie Bien, associate director of Savills Private Finance, said: These are becoming more and more popular, with lenders like Abbey, Direct Line and The Woolwich offering them.
The idea is that the rate is low enough that you wont want to switch. Of course your repayments will still be subject to change because they tend to track the Bank of England: if that goes up, so do payments, but most of the rates are pretty low to start with, adds Bien.
And if you dont mind switching, two-year trackers are tempting for remortgagers at the moment.
Loading ...