With the mortgage interest rates dropping as they have done over recent months, there’s likely to be a lower mortgage rate available than the one you are currently on. Should you be rushing out to a local mortgage broker to see if there are better mortgage rates on the mortgage market for you?
Maybe, maybe not. It’s not always that simple and that’s the reason that whether you are looking at mortgagetables online or by visiting your local banks, you should always seek free, independent advice from a mortgage advisor. Don’t just swap mortgages because your new lender tells you they have a better dealfor you. Don’t just go out and find a lower interest rate on the internet and apply for it, thinking all will be wellonce you have completed your new loan.
Why might it not be a good ideain all cases? Well, one of the first questions an independent mortgage broker will ask you may be about any tie-ins you have with your current mortgageproduct. If you move your mortgage now, will you have to pay any financial penalties to your current lender? These could be quite significantcosts. If the penalty is to pay a few months’ interest just to get you out of an existing mortgage deal, then it might require you to reduce your monthly mortgage repayments a lot in order to recover the extra expense, and this might not be possible.
Assuming that your current mortgage product has ended its comfy initial introductory period and you are now on the standard variable rateproduct, without any tie-ins, then there are still plenty of warning flags that might make it harder or financially uncomfortable for you to remortgage. These, along with any other relevant warningsthat need to be looked at, should be discussed and worked through with along with your mortgage broker.
For example, do you still count as the same level of credit risk as when you took out the mortgage to begin with, or have you missed any repayments, or have you made a lot of credit applications lately? Has the value of your property fallen, maybe meaning that your borrowing will be an even larger proportion of the house price? If your mortgage value is now more than 75% of the value of your house, a future mortgage could be very expensive. These might mean that lenders won’t be as happy to consider your application and offer you a mortgage, or at least not as good an offer. You could be shoved onto a more expensive productbecause of a change of circumstances.
And even these aside, there are arrangement feesfor your new mortgage, completion feeson your existing mortgage, other legal fees and maybe survey fees on your own property. All of these charges have to be paid for. Pay for them up front, and then you have to work out what the long term impact is effectively. Add them to your mortgage and you end up paying more each monthfor the entire life of the mortgage.
Either way, reducing your monthly repayments isn’t just about finding cheaper mortgage rates. You have to take into account all of the associated costs and impacts and total up over the next few years if moving mortgage will actually save you any cash, or whether it will cost you money. Ask an independent mortgage broker to give you a written model, comparing your current position to your proposed mortgage position.
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