How mortgage consolidation works

By December 15, 2008Mortgage Consolidation

Mortgage consolidation quotes are usually given with no obligation, so you can shop around for the best deal without having to make an immediate commitment.

I want to consolidate my mortgage – what should I expect?

Mortgage consolidation companies often encourages new business by advertising really low monthly repayment rates. But you need to consider more than the cost of the repayments.

•    Confirm what interest rates they’ll charge

•    Is the interest rate fixed or variable?

•    What is the total cost of the mortgage over the whole term? If anything will put you off, this will!

•    Establish what the monthly repayments will be

•    Find out whether monthly payments will go up or down over time for any other reason, for example if it is part of the agreement that your payments increase every five years or in line with inflation

•    Find out what happens if you want to pay off your consolidated mortgage early. There might be early payment penalties.

•    Find out what happens if you miss payments and go into arrears.

Make sure you get all this information in writing and file it safely for future reference.

Repaying consolidated mortgages

Make sure that you keep up your repayments or you could risk repossession.

What does it cost to arrange mortgage consolidation?

Your mortgage adviser will let you know the charges for setting up the mortgage up front so you shouldn’t get any nasty surprises. This charge depends on your individual circumstances but a £250 administration fee isn’t unusual, payable when you apply. As a rule you also have to pay either a lump sum or a percentage of the mortgage advance, whichever is the greatest.

Some providers apply another fee at completion. If they get commission from the mortgage lender, they will either refund the commission to you or pay it against their fees. Some might offer to pay the fees as part of the deal, but this is becoming rare as the economy falters.

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