Remortgage or pay the variable rate?

During the last ten years lenders have increasingly sought to attract new clients who are not moving home, but simply looking for a cheaper mortgage. Remortgaging can be worthwhile especially if you are paying a standard variable rate and have no penalty for leaving your current lender.

Why pay the standard variable rate!

Even in today’s competitive world, many borrowers are paying their lenders standard variable rate; this is often the most expensive rate in the lenders product range. Although most borrowers will not take out a mortgage on a standard variable rate, it is often the default rate after the initial fixed rate or discounted product has ended.

Remortgage to save money

Borrowers being charged a standard variable rate should review their mortgage as soon as possible. The first point of call should always be their current lender to find out whether a cheaper mortgage product is available. Most lenders are keen to retain existing customers and will usually offer an alternative to their standard variable rate. Before agreeing to a new mortgage product, borrowers should find out what other lenders have to offer. Contacting a non-fee charging, whole of market mortgage broker is the quickest and easiest method of obtaining information about mortgage products available with other lenders. A good mortgage broker will compare what the borrower has been offered with the existing lender with suitable products available in the mortgage market. The broker will advise whether it’s best to stay with the current lender or whether there’s a benefit in moving the mortgage to another lender. If moving the mortgage to another lender is the best option, the mortgage broker will organise this.

Remortgage to release money tied up in your home

Our home is usually our biggest asset and much of our wealth is tied up in its value. Many borrowers forget that they may be able to release some of the money tied up in their home by either increasing their current mortgage or by remortgaging. Most lenders will consider a remortgage where the borrower is increasing the mortgage, however limitations may apply in regard to the use of the money being raised. The most common reasons for increasing a mortgage are home improvements, debt consolidation and major purchases such as a holiday home, car or boat. Borrowers should think carefully before securing additional debt against their home as mortgages are often repaid over a longer term and this can mean that total cost of the borrowing is higher than a short-term personal loan or similar credit facility.

Getting the right advice

Remortgaging does not suit everyone; you should discuss your situation in detail with a qualified mortgage adviser. All UK lenders and mortgage advisers need to be regulated by the Financial Services Authority (FSA). Mortgage advisers should be professionally qualified and you should check to ensure that they have the appropriate CeMAP qualifications.

Article by: Lee Dawkins 17-10-2007

The articles on this site solely reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of Smaart Associates Limited. All comments and opinions are made in good faith, and neither Smaart Associates Limited nor the author will accept liability for them.