A simple way to save money on your mortgage
Five Great reasons to remortgage:
• Save Money – you may find a better rate of interest to suit you and reduce your monthly mortgage payments.
• Release money – Tap into your equity in your property and turn your dreams into a reality.
• Consolidate your debts – Interest rates on mortgages are lower than most types of personal loans or credit cards.
• Added Security – If you move to a fixed rate from a variable rate you will know exactly how much you will pay each month.
• Invest – By remortgaging you can extend or improve your home or even buy another property.
Why should I Remortgage?
Switching to a cheaper mortgage deal is one of the easiest ways a homeowner can save money. Not only can remortgaging reduce your monthly repayments but it can also be used to release some equity that has built-up in your property's value.
What is the first step to remorgaging?
The first step is to check the terms and conditions of your existing mortgage. It will tell you if you are tied up to your mortgage deal or if there are any redemption penalties. If you are locked into a fixed-term mortgage deal, early redemption charges could wipe out most of your potential savings. So it may be best to wait until these penalties have expired.
There are two main ways of paying back a mortgage :
Interest only
With an interest only mortgage, you are required to pay only the interest as a monthly charge, so the original amount borrowed is still outstanding at the end of the term. Interest only mortgages are therefore normally tied to another investment strategy to accumulate enough funds to pay back the full loan within the agreed time. It is your responsibility to ensure the mortgage is repaid in full at maturity.
Capital repayments
This is the easiest form of repaying a loan. Your monthly repayments consist partly of the original amount borrowed plus some of the interest on it.
Interest rates
Fixed rates – Fixed interest rates are ideal for people who want certainty, it protects you against the Bank of England base rates, which would usually affect your monthly payments.
Discounted rates – These loans offer a reduction off the standard variable rate (SVR) for a set period. For example, if the SVR is 6.5%, a lender may offer you a discounted rate of 5.5% for the first six months.
Trackers – A tracker mortgage follows the Bank of England's Basic rate as a set margin; e.g. 1.0% above the base rate.
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