About two out of five mortgages have been remortgaged last year by the smart few, in view of the competitive deals available on their current loans. However, one in three homeowners have also failed to realize the saving potential of the remortgaging process and continue to pay the Standard Variable Rate to their lenders in spite of better deals in the market.
Before going in for a remortgage, one should ensure that the potential savings derived should be able to offset the costs of remortgaging. In addition, people with a small mortgage amount around £30,000 would be better off adhering to their current deal since any savings could clearly be outweighed by the remortgaging costs.
However, for those who've never considered remortgaging before, a look at the latest competitive rates on the market is definitely worth it.
A £100,000 repayment loan over 25 years at 6% costs £644 a month whereas a loan at 5% would cost around £584. So, switching over to the lower rate i.e. a remortgage would save you £60 a month and of course thousands over the entire term of the mortgage. For interest-only mortgages, cutting merely one percentage point off a £100,000 mortgage would save you as much as £80 a month.
The whole process of remortgaging is quite straightforward. You can first consult your current lender to check for a better deal. As they wouldn’t want to lose a customer, expect them to come up with offers that wouldn’t involve much effort from you, maybe just a phone call or a few signatures. However, do not sign on the dotted line in haste and assure the best deal by carefully reading the small prints! In case your lender has nothing much to offer, you can then call a mortgage specialist and search for lucrative deals in the market.
Also it is important to know that lenders now are required to supply you with a ‘Key Facts Illustration’ which gives you a clear idea about what your mortgage will cost you over the entire term, thereby making it simpler for you to estimate your savings in the event of switching. There are legal and valuation fees to be paid and some lenders may even agree to pay them for you. You may, however, have to pay redemption penalties to your old lender. Therefore, calculate your remortgaging costs with care to strike the best deal possible.
Posted
on : Fri, 18 Mar 2005 00:00 GMT | Mortgages News
By : Anne Philips
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