Already bought your dream home? Relieved that you’ll never have to look at another piece of mortgage paperwork ever again? Well, what if you could lower your mortgage payments by going through the whole process all over again, every few years?
Although you might be in a fixed-rate contract to start off with, once you’re outside the ‘penalty for redemption’ date, it could be worth shopping around for a different rate.
So, what do you need to bear in mind if you’re considering switching?
Often, people just go to their existing bank for a mortgage because they think it will be easier and involve less paperwork, but it could cost them more in the long-term. There’s the potential you could save hundreds, or thousands, of pounds by shopping around for the best mortgage rate. It’s not just first-timers that should keep an eye out either, it’s people who already have mortgages, too.
Keep your eyes peeled
If you’re not tied in to a deal with early repayment penalties, you may want to look around once a year to see if there’s a better deal on the market. Once every 12 months might sound a lot, but this is likely to be the most significant purchase you will ever make, and, just as the payments continue month-on-month, year-on-year, so does your opportunity to get a better deal.
React to the market
There are certain times that it makes sense to hunt for better rates, including when interest rates change, as this may affect the other deals on the market. Another good time to shop around is when your mortgage deal comes to an end, as this may increase your rate, defaulting to your lender’s standard variable rate. And if the property market is on the up, then you could remortgage and potentially knock hundreds off your monthly repayments by falling into a better loan-to-value (LTV) category - this is the percentage of your property that is mortgaged, and the amount that is yours (usually referred to as your equity). Just take care to weigh it up when factoring in the charges and fees associated with remortgaging.
Look out for hidden costs
Of course, how often you can change your deal depends on whether you’re locked into a fixed or discount rate deal with an early repayment charge attached.
As well as early repayment charges, it’s possible you might be charged valuation and legal fees, although these can sometimes be waived when your new mortgage goes through. If you’re switching lender, then it’s possible there’s an exit fee to pay, too, and there can also be booking/ arrangement fees for taking out a new deal.
These costs shouldn’t necessarily put you off switching mortgage, but it’s important that you take them into account and add up the total cost of remortgaging before you commit to a new deal.
Keep things short and sweet
If you do choose to switch and the monthly payments are set to be lower, then you can usually either make reduced payments each month or stick to your original payment plan and reduce the term of the mortgage. If you decide to pay in more, there are limits on the amount of overpayments made before invoking charges. You can access information on charges either through your Terms and Conditions or through your lender.
Do it yourself?
If you're a bit savvier you could consider going 'direct' and research mortgages by yourself - on comparison websites, for example - and end up picking one, this is known as ‘execution-only’.
Getting advice could work out to be a better option, as it means you’ll have more rights if something goes wrong down the line, but be aware that you may have to pay for the advice you receive.
Could a mortgage broker help you get the best deal?
A broker makes it their business to know all the best products on the market. It’s important though, that you ask your broker the right questions, including: checking their fees (if they have any), finding out if they’re registered with The Financial Conduct Authority and seeing if they’re able to look at all mortgages available in the UK, or whether they only sell products from a very limited panel of lenders.
Whether you’re just about to get a mortgage or you’ve already bought your home, you could save a bundle by keeping an eye out for competitive mortgage rates.
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