Local homeowners in Hitchin have recently asked our mortgage brokers if now is the right time to remortgage their homes.
As we move through life, our circumstances change, and the right mortgage solution for us 10 years ago may no longer be right for us now. A 5 year fixed rate mortgage may have been suitable for you when buying your first home; however, a 5 year fixed rate might be the wrong choice now.
Speaking to a mortgage broker, telling them about your current circumstances and what you want to achieve in the future is important. This knowledge will help them create the right mortgage solution to help you achieve what you want to.
Whether it’s buying a holiday home or retiring early, selecting the right mortgage product can help you achieve this. There has never been a better time to consider remortgaging than now. Mortgage rates are extremely low and mortgage choice is high.
Don’t move to a standard variable mortgage rate without shopping around
So many of us simply forget, and don’t get round to reviewing our mortgage or don’t shop around and just remortgage with their current lender. This can be an extremely costly mistake.
We highly recommended seeking advice, and with interest rates at their lowest for over 10 years, yes, now is the perfect time to speak to a mortgage adviser to find the best deal for you.
An adviser will search through a range of lenders and products from the high street and beyond to find you the best product possible. We at Fortune financial, Hitchin, will create a bespoke mortgage recommendation, tailored to your specific situation. As we are part of the Primis mortgage network, the largest mortgage network in the country, we have access to exclusive deals from many of the major lenders that aren’t available to other advisers.
When I speak about the best mortgage product, I don’t just mean the lowest interest rate. We will also consider the associated fees within the product and the unique lending criteria. Meaning we will find the most cost-effective mortgage deal. Often, we see the lowest interest rate product also has the highest fees. Therefore, when compared with other products over the same fixed term they actually cost more than a product with a slightly higher interest rate. I highly recommend when speaking to an adviser to ask about the true cost of the product and how it compares to other products for the same period as the lowest interest rate isn’t necessarily the best deal.
What types of mortgages are there?
Fixed-Rate Mortgages
Most mortgages will have a ‘fixed rate period’. This can be for anything from 1 to 10 years but generally 2 and 5 years are the most common.
During the fixed rate period the interest rate won’t change, the benefit of this is that you can budget more effectively. The length of the fixed period is determined not only by the interest rate but also what you plan for the future. For example, if you plan to move home in 3 years, then don’t fix the rate for 5 years as you are likely to incur an early repayment fee which will be charged as a percentage of the remaining balance.
Once the fixed rate period has finished the mortgage will revert to the lenders ‘standard variable rate’ or ‘SVR’. This interest rate is set by the lender, and they can change it as and when they wish, meaning that it is difficult for you to budget. As you would expect this is higher than the fixed rate meaning that you will be repaying more interest each month. On top of the extra spend on interest it will become very difficult to budget.
Mortgage products aren’t limited to just fixed and variable. The options are almost endless and picking the right product to suit you can save you considerable money and it could mean being mortgage free much earlier.
Tracker Mortgages
A ‘Tracker’ mortgage will literally track the bank of England base rate and generally sit at 1% above or below. This means that although your monthly payments can vary you aren’t at the mercy of the lender and your payments will change at most 8 times per year.
Capped Mortgages
A ‘Capped’ mortgage will mean that the interest rate will not go above a pre-determined ceiling, but it can fluctuate below that amount. This allows for worst case scenario budgeting. There is also the option of adding a ‘Collar’ to this product meaning that the interest rate will not drop below a set amount, adding a collar will generally lower the ceiling rate but you will not benefit from any rate reductions below the collar.
Offset Mortgages
An ‘Offset’ mortgage is perfect for those of you that have savings set aside for a rainy day but aren’t earning great rates of interest. Instead of holding your savings in an account with a low interest rate, you hold your savings in an account with your mortgage lender that generally earns 0% interest. However, when the lender calculates the interest on the mortgage, they will deduct the amount held in the savings account. You can add to or remove money as you wish from this account. Essentially it is a temporary over payment and your savings are working much harder for you than they would if they were held in a regular savings account. If managed properly it can mean that you shave years off your mortgage term.
There are many other products available that may suit your needs better than the products described.
How easy is it to remortgage?
Re-mortgaging could not be easier, because you already own the property there is no need for the extensive property searches that the conveyancer needs to complete, plus no other party involved. A re-mortgage will generally be completed within 4 weeks, and the mortgage offer can last up to 6 months meaning that you can secure your new deal long before it is due and the transition between the old and new product is seamless.
Contact our Mortgage Brokers in Hitchin today for free, bespoke, no obligation advice on 01462 510 400 or email info@fortunefinancial.co.uk
Cade Somerville
Specialist Mortgage Broker, Fortune Financial, Hitchin, Hertfordshire
