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Now that your mindset’s firmly in a ‘cut your outgoings’ groove, it’s time to shimmy on up to your next money-saving opportunity – remortgaging. Switching to a lower interest deal now could slash your monthly outgoings, potentially saving you hundreds – even thousands – of bill-busting £££s in 2008!
Click here now to find yourself a great new mortgage
Five Reasons to Remortgage
1. Save Money – you could save over £1,600 a year*
If your mortgage discounted rate period is about to end, now’s the time to think about switching to a better deal to avoid paying your lender’s standard variable rate (SVR). The SVR is likely to be significantly higher than your discount rate so you could be in for a ‘payment shock’ as your monthly mortgage payment jumps.
For example, if you’re mortgage is fixed at 5.49% and the discount period’s about to end, your rate will jump to an SVR likely to be in the region of 7.49% per annum. This means that on an outstanding debt of £113,000 (the typical Confused.com customer‘s mortgage), payments will jump from £693.24 a month to £834.33 a month. But by using Confused.com to remortgage to another 5.49% deal (adding the lender fee of £999 to the loan), repayments would drop to £699.37 a month – saving you £134.96 a month... That's £1,619.52 a year!*
To save yourself £££s, search our mortgage deals now
or call 0800 085 1277
2. Cut Your Mortgage Term – you could make considerable savings on interest payments
If you’ve been paying your lender’s SVR without any problem, why not remortgage to a better deal whilst keeping repayments the same. This way, you’ll clear your debt sooner (potentially years sooner), which could save you many thousands of pounds in interest payments.
Alternatively, you could find a mortgage that allows you to make overpayments or lump sum payments. Overpayments will also reduce the mortgage term and you could again make considerable savings on interest payments. It is admittedly true that this tip won't make you any better off in 2008... But the long-term benefit is that you will be able to pay your mortgage off early!
Click here to find a great new mortgage
3. Grab a Fixed Rate Mortgage – control outgoings by fixing monthly repayments
Another way to manage your outgoings is to fix your mortgage repayments. A fixed rate deal allows you to budget more accurately as you’ll know exactly how much money your mortgage will cost each month.
With a fixed rate mortgage, interest rate and repayments remain constant for the entire length of the fixed period (typically between two and 10 years), regardless of changes to the lender’s SVR. To maximise savings, try and find a deal with a low arrangement fee or free legal fees/survey.
Click here to find great fixed rate mortgages
or call 0800 085 1277
4. Release Home Equity – consolidate your debts
If your home has jumped in value or you’ve been paying the mortgage for a while, you could cash in some of its equity. Increasing your mortgage allows you to release this equity and the money can be used to pay off existing debts.
If credit card payments or other high-interest debt (store cards, personal loans, overdrafts etc) have become a strain, transferring them to your low-interest mortgage will reduce your overall monthly outgoings. This is a great solution to managing your outgoings in the short term, though it’s important to realise that by lengthening the repayment period you could end up paying more in the long term.
However, if you remortgage to a deal with a lower interest rate (easy to find if you’re currently paying your lender’s SVR), you can increase your mortgage while maintaining a similar level of repayment.
Click here to find a great new mortgage
or call 0800 085 1277
5. Flexibility – repay your mortgage the way you want to
When money is tight, you may want a mortgage that allows you to make occasional underpayments or take payment holidays. Likewise, when you’re flush, you may want the flexibility to make overpayments. Your present mortgage may not allow this, but change to a flexible mortgage and an over/underpayment or payment holiday facility will be built in.
For Olympic gymnast levels of flexibility you may want an offset or current account mortgage. With these, any savings you have with the same lender will be used to immediately reduce your mortgage interest. Also, any loans you take out will be at the same rate as the mortgage, likely to be a much lower rate than a separate loan product. Therefore, for big savers, people who receive bonuses, or those who continually keep their current account in credit, offset/current account mortgages might be seen as the best way to pay off your mortgage early.
Note: your existing mortgage may already have a degree of flexibility, and as offset/current account mortgages tend to have higher interest rates, the cost of switching may outweigh the benefits, particularly if you’re unlikely to take full advantage of the flexible facilities. If you're unsure whether you're getting the full benefit, why not speak to one of our morgage partner's experts by calling 0800 085 1277?
Click here to find a great flexible mortgage
or call 0800 085 1277
The Cost of Remortgaging
Before doing anything, make sure you’re aware of the cost of remortgaging. If you are still in your tie-in period, there will almost certainly be an exit fee to cover the admin cost of ditching your current mortgage (likely to be around £100 - £300, check with your provider), and you will have to pay again if your mortgage has an Early Repayment Charge (ERC).
An ERC will likely last the duration of your special rate deal, but it may extend into the lender’s SVR period (known as an ‘overhang’). For example, a mortgage with a three-year discount could have a five-year ERC, which means at the end of the discount period there’ll be a two-year overhang – therefore, remortgaging during these last two years will still attract an early repayment penalty.
In addition, you may also have to fork out to secure a new mortgage, e.g. an arrangement fee (typically £500 - £1000), plus legal and survey costs.
The trick is to find a mortgage deal where the initial costs are outweighed by the potential savings. If the difference is in your favour, then it could be worth considering a remortgage. In short, always do the maths (or ‘math’ if you’re American). Give our mortgage partners a call on 0800 085 1277 to talk through what's best for you.
Seek Advice
If all this talk of ERCs and SVRs is getting confusing, you can get FREE and expert advice from our mortgage partners, Charcol. Click here or call now on 0800 085 1277 and quote 'news'.
So, if you’ve made up your mind to control your outgoings in 2008, remortgaging is just one area where you could make serious savings.
One more thing, always keep a sharp eye out for the latest deals because lenders regularly introduce mortgages with special offers to tempt customers. These incentives can include no ERCs, no arrangement fees, no legal fees or a free survey.
Click here to find a great new mortgage
* Savings based on a loan size of £113,000 (the average Confused.com customer mortgage). Using an SVR of 7.49%, monthly repayments would total £834.33/month. By remortgaging to a Co-op 5.49% product, payments reduce to £699.37/month (including lender fee of £999), saving £134.96/month (£1619.52/year). Example based on a 25-year repayment mortgage. Full details of calculations available on request. Details correct at time of publication. Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it.
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