Due to the current recession, homeowners are extremely keen to save money on their mortgages: with the base rate at an historic low, there are some excellent deals to be found on the market. Here, the minefield that is the mortgage market is examined, with helpful tips on how to find the perfect product for you:
- Finding the right mortgage deal is very important, potentially saving you thousands over the long term. Cheaper monthly payments also mean that you could pay your mortgage off early (by using the money saved on overpayments, if a product allows you to do so).
Because there are so many products on the market, it is not always easy choosing the right one for you: mortgages with extremely low interest rates sometimes hide the fact that the rate is only introductory and will rocket when the introductory rate expires. Also, if you tried to get out of such a deal early, you will probably be hit with expensive early exit charges.
- It is important that any mortgage you take out is well matched to your personal circumstances – if you are overwhelmed by the sheer number of products on offer, then enlist the help of a free independent mortgage broker company such as London and Country; they can remove all the stress from yourself and search the whole of the market in order to save you as much money as possible.
- It is important not to be too hasty when remortgaging, as new, increasingly competitive products are constantly coming onto the market. Products are offered for 3-6 months, and it is possible to book these in advance. If you are thinking about doing this, seek the advice of an independent financial advisor or mortgage broker: they will be able to advise you whether it is wise to go ahead or wait to see what other products become available.
Peter McGahan, independent financial advisor at Worldwide Financial Planning, advises:
“If your fixed, tracker rate incentive is coming to an end, with certain lenders it may be best to do nothing at all; once your incentive period ends you will automatically move onto your lenders Standard Variable Rate (SVR).
At present, many lenders’ SVR is actually lower or close to what new remortgage rates are available on the open market. You will not incur any fees to move to the SVR and you will also be free from any Early Repayment Charges or tie-ins, allowing you the ability to re-assess your situation over the coming months”.
- Another reason to avoid hasty remortgaging is cost: if you are accepted for a particular loan and then change your mind, some lenders will charge hefty penalties if you back out. Some retain the application fee or keep all or half of the arrangement fee; this could be as much as £1000, so it really does pay to be 100% sure about a product before you sign up. Some lenders (such as the Halifax) charge no upfront fees, but this is rare.
- Due to current economic conditions, mortgage applications have taken a nosedive, particularly in the area of remortgaging. This is down to several factors, including the fact that many people now have a high LTV (loan to value) ratio as a result of falling house prices. Some homeowners with a previously healthy LTV of 70% or below are now finding themselves with a mortgage totalling 90% or more of their property value, and most products on the market today require a LTV of 80% maximum. Thus, these homeowners will find it extremely difficult to remortgage.
For such people, there are various options:
1. Wait for the market to pick up before remortgaging
2. Consider using savings or taking out a loan to pay the deposit required on a remortgage (only if it is a deal not to be missed and will save you a considerable amount of money in the long term).
3. Employ a financial adviser or mortgage broker to search the mortgage market for products offering a high LTV. However, it is believed that there are less than 10 such products available.
The key to remortgaging during this difficult time is not to rush – take the time to research the various products on the market and consider employing the services of a financial advisor or mortgage broker if you find the task too daunting. This way, you can be confident that any remortgage deal you choose will be the right one.