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Switching mortgages

 

It is surprising how little attention people pay to their mortgage once they have arranged it, but deals and rates change over time and you could be paying much more than you need to. Did you know that over 50% of UK mortgage borrowers are paying the lenders standard variable rate? The answer is to remortgage.

 

Remortgaging, in effect, allows you to become a new borrower again and this enables you to take advantage of new deals and therefore save considerable amounts of money. As an example, if you have a £100,000 loan on a standard variable rate of 6.85 per cent and switch it to a 3 year tracker at 5.19 per cent, you could save yourself approximately £138 per month; this equates to a staggering £4,968 over the three year term.

 

Remortgaging can not only save you money, you can also use the process to unlock some of the capital tied up in your property, to consolidate your other debts into a more favourable rate, to help fund home improvements, or to buy new property for investment.

 

So what does it cost? Well the cost is made up of a number of fees, which vary according to the value of the property. These fees are usually:

 

  • Valuation fee
  • Lender's arrangement fee
  • Solicitor's fee and disbursements
  • Redemption charges you may have to pay a previous lender

 

As a rough guide, the costs of remortgaging a £50,000 loan are in the region of £750, without accounting for redemption penalties, but remember there are some loans available where some or all of the costs are paid for by the lender as part of a remortgage package. You may even be eligible for a product offering cash back.

 

Check if you are liable for any redemption penalties from your last lender before you commit yourself to switching, in some instances this can be quite costly. If you have no penalties, you are ahead of the game, but if you do have penalties you will need to subtract their cost from the savings you would make by changing to a cheaper rate.

 

Deciding which mortgage product to take can be daunting as there are literally thousands of mortgage products available at any one time, do you take a fixed rate, a capped rate, a discounted rate or a combination of these? Many personal finance sections of newspapers carry best buy tables for mortgages that will give you a rough guide to what is available. However, faced with so much choice and confusion, many people find that consulting an independent mortgage adviser takes the strain out of hunting for the right product. An independent adviser will have access to the entire mortgage market and can advise you on the best product to suit your needs and circumstances, saving you the trouble of trawling the high street.

 


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