Mortgage
Clear your mortgage years ahead of schedule.
Most of us dream about living without a mortgage
millstone hanging around our necks. And there are two
ways that remortgaging can bring this day forward far
sooner than you might expect.
First, some or all of the savings you make by switching from an old, expensive
mortgage on to a new, cheaper alternative can be used to chip away at the size
of your debt. Lets say your old monthly repayment was £850. A remortgage could
easily bring this down to £700 – but you could agree to keep paying the full £850 to
your new lender for a while. It means an extra £150 a month or £1,800 a year will be
knocked off the value of your mortgage. What is even better news is that the effect of
these sorts of overpayments can increase as the years go by, shaving even more off
your loan. So while you are free to stop making overpayments at any time your loan
will start shrinking even faster the longer you stick to them.
The second way a remortgage can help you cut your mortgage term is by picking a
far more flexible deal when you switch. So-called current account or offset mortgages
allow you to use the value of any money in your bank or savings accounts to help
clear your loan early. The loans are complicated to understand, so it may be worth
discussing them with an independent broker such as Home before picking one.
If they do suit your circumstances then a remortgage can help you take advantage
of them and clear your mortgage debt fast.
Borrowers urged to avoid SVRs
Borrowers whose discounted or fixed-rate
mortgage deal is about to come to an end have been advised to remortgage and avoid unnecessary overpayments.
At the beginning of the month the Bank of England's monetary policy committee voted to increase the base rate by 0.25 per cent to 5.25 per cent - its highest level since April 2001 - which has had a knock-on effect on mortgage rates.
Mortgage firm John Charcol said that lenders' standard variable rates (SVRs) have increased by typically more than one per cent in the last year, reaching 7.75 per cent in some cases.
While borrowers whose deal is coming to an end could have "a nasty shock" when faced with new SVRs, some homeowners still see remortgaging as a chore and leave thinking about it until the last minute, the company said.
It pointed out that borrowers with a £100,000 mortgage could save £147 a month in interest by remortgaging from SVR at 7.5 per cent to a more competitive loan at 5.34 per cent (7.5 per cent APR).
Product specialist for Charcol Katie Tucker said that as it is still uncertain how high interest rates will go, it is important for borrowers whose mortgage is due to fall onto their lender's SVR this year to do their homework to make sure they move to the best deal.
Ms Tucker commented: "It is really important to consider all elements of the process to ensure that the mortgage they move to is the most suitable for them."
Home Mortgages comments “With the threat of further interest rate rises it maybe prudent to remortgage now. Many fixed rate mortgages are still keenly priced as lenders fight for a share of this lucrative market.”
Landlord Mortgages comments “Buy To Let remortgages account for over 50% of our current business. Most landlords are arranging Buy To Let Fixed Mortgages in anticipation of further rate rises.”
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