Mortgages - Tips And Useful Information

The Monster that is Mortgage

We are a self confessed nation of accomplished shoppers when it comes to our biggest purchase. It doesn’t surprise me that the ‘what deal have you got?’ conversation is openly discussed considering that it is estimated over half of all borrowers are paying over the odds on their mortgage each month. Most of these people are paying the lenders standard variable mortgage rate so switching to a cheaper deal is an astute way to save some cash.

It may surprise you to know that reducing your rate by point one of a percent would save someone with a £100,000 loan about £1000 a year. Sounds like a nice holiday in the sun to me. Re-mortgaging has become a much less complicated process in recent years with lenders offering a much more informed service to make the journey sweeter, some even offer deals with legal and arrangement fees thrown in. It’s still a minefield out there so I’ve included some information to get you started and prompt some questions to your potential lenders.

Equity Release
Re-mortgaging isn’t just about saving money as you may want to get your hands on some of the equity locked in your home for a new car or conservatory. Increasing your mortgage may have an affordable monthly payment considering low interest rates but remember you will be paying interest on that extra amount for the whole term (25 years instead of the 3 years you may choose on a personal loan). If you feel comfortable using some of the equity in your home remember that this is a secured loan and if you cannot keep up repayments your home is at risk.

Getting Started
Check the terms and conditions of your existing mortgage before making a move as you may be surprised by an early settlement fee or tie in period. If you discover a penalty you will need to do the calculations to decide if it may be more sensible to stay put for the time being. You can go to a direct lender or speak to a Broker who will scour the market for you. Brokers often have special deals that are not available on the high street but you will need to satisfy yourself that you are not paying over the odds for the service.

Which Deal?
Most mortgages can be categorized broadly into four sections; Fixed, Capped, Discounted and Flexible. These each hold very specific advantages and are of course balanced with other clauses in the agreement. Make certain your decision is fully informed taking into account all these variables.

Applying
Request a ‘redemption statement’ from your existing lender which will tell you how much you owe. Your chosen new lender will advise you on the information you will need to provide. The lender will need to value your home and charge an arrangement fee. You will also incur legal costs that vary dependant on the solicitor you use. The whole process usually takes about a month if there are no complications.

This is of course only a small slice of information of the cake that is mortgage but hopefully it will make sure you don’t bite off more that you can chew!

The opinions expressed are those of the author only. The material is for general information only and does not constitute legal, financial or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation by an FSA authorised company where the market is FSA regulated.