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Remortgaging to get a better interest rate

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A mortgage can make you save hundreds of dollars. However, there’s a myriad of factors you should be aware of to make sure that you get the best deal.

Why should I refinance my mortgage?

When you first got for your loan, you could have had a really good deal. But over time the market for mortgages changes and new offers become offered. This means there might be more favorable rates available to you right now, and could save you hundreds of pounds.

It is not necessary to change lenders.

Check whether there are any arrangement or product fees on any mortgages you’re considering looking at as well as, if you’re terminating the mortgage agreement early, any early repayment charges from your current lender.

These charges can be added to the cost of remortgaging , and can make remortgaging more costly than remaining on your current loan.

When should I refinance?

You can refinance anytime. If you’re still not at the end of your discount or fixed rate period, you could be required to pay an early repayment charge. Click here for information on a remortgage after fixed term.

Many people choose to refinance their mortgage at the close of their fixed or discount rate term because that is when your mortgage might end up being an expensive deal.

Before you switch, be certain to review the cost.

Some lenders may offer free deals to lure you in however, if they do not then you’ll be charged the legal, valuation and administration charges to cover.

You can use the annual Percentage Rate Charge (APRC) to assist you find deals.

It is a method of calculating interest rates. APRC is a way of formulating interest rates by incorporating mortgage-related fees in the calculation, giving you an opportunity to assess mortgage rates.

The simplest saver could end up losing you money If you don’t first do your math first.

The reduction of your loan-to-value can result in a better rate

Each mortgage agreement has a limit to the amount you can borrow as compared to the present market value.

The figure is in the form of the percentage, and it is referred to as the “loan-to-value”.

When you remortgage to purchase a home, the lower the ratio of loan to value you’ll require, the greater deals might be available to you – which should bring you lower mortgage rates.

How do you calculate your loan’s value

Divide the amount of your outstanding mortgage by the value of your current property.
Divide the result by 100.

Example

the outstanding balance on your mortgage is PS150,000.
Your lender believes that your home is worth PS200,000
150,000 divided by 200,000 = 0.75
0.75 x 100 = 75 So your loan-to value is 75%.

Be sure to verify related fees and charges.

Your lender’s valuation

When you apply for a loan, the lender’s valuation might be based on the exterior of your property on the outside from the street.

If you believe the value isn’t right – and you’re not getting a better rate due to it – you should solicit that the bank reconsider.

For evidence for your argument, you may provide evidence of the purchase price of the similar properties within your locality and, should it be necessary, provide the cost of any house renovations you’ve completed.

Remortgaging to get a better interest rate

If you get a new loan typically, you will receive an introductory deal.

It’s probably your mortgage will have a discounted or fixed rate or a low tracker rate for the initial few years of your mortgage.

Introductory deals normally last for between two and five years.

When the deal comes to an end it’s likely that you’ll be moved onto your bank’s variable-rate standard which is usually higher than the rates you’d get elsewhere.

So when your introductory period expires, take a look at the marketplace to determine whether switching to a new mortgage deal will reduce your costs.

If you’re only left with an amount of money left to pay off your mortgage the savings of switching to a new one could be too low for it to be worthwhile.

Remortgaging for more flexibility

The process of refinancing can allow you to get a more flexible deal – for example should you decide to overpay.

Maybe you’d like to switch to an offset or current account mortgage. In this type of mortgage, you make use of your savings to decrease the amount of interest you have to pay permanently or temporarily and you can choose to draw your savings back when you’re in need of they.

Consolidating debt with a mortgage

If you’re in a significant amount of debt, you could be tempted to take out extra cash and then use it to pay off your other debts.

However, even though the interest rates on mortgages tend to be lower than those on personal loans – and much lower than credit card rates – you could end up paying more overall if your loan is over a longer period.

Instead of adding your debt to your mortgage, you can try to prioritize and clear your loans in a separate manner.

Check the market for mortgage offers

Remember:

The comparison websites don’t give you the same results, so make sure to use several sites before making a final choice.
It’s also important to do some research into the type of product you want and the features you require prior to purchasing or changing suppliers.

Take care when refinancing and entering into a new agreement with high fees for early repayment in the event that you’re planning to move to a new home in the near future.

The majority of mortgages are now “portable that is to say they can be moved to a new home. However, moving is considered as an application for a new mortgage, so you’ll have to pass the lender’s affordability criteria and other criteria to be approved by the lender for the mortgage.

If you do not pass the tests, the only alternative is to approach other lenders, which could result in paying the early repayment cost of the current lender.

‘Porting’ a mortgage can usually mean that the existing balance remains on the discount or fixed-rate deal, so you must choose a different deal for any additional borrowing for the move . This new offer is likely to tie in with the timescale of the deal currently in place.

If you’re sure you’ll move home within the initial repayment charge period of any new loan, you may want to consider options with no or low early repayment charges , which gives you the ability to search among lenders once it is time to move.

Get help

Taking advice from a qualified expert can give you additional security as if the loan is found to be insufficient You can file a complaint with your Financial Ombudsman Service (FOS).

If you choose to follow the ‘execution-only’ method (where you decide on your own without advice) it will mean that there are fewer circumstances where you can file a claim with FOS.