With interest rates at record lows and some extremely competitive mortgage deals around, it is a good time to consider remortgaging onto a new deal.
Below, we run through a few factors to bear in mind:
- Take into account the full cost of the deal, including rate plus fees. Many remortgage deals come with free legal fees and valuations, which can help keep the cost down.
- Check your existing deal doesn’t have any early repayment charges. Many borrowers may be able to find a cheaper rate than their current one but the cost of redeeming a mortgage early can outweigh any savings by quite a distance.
- Make sure you choose the right product. A number of clients have been asking for five-year fixes where they might be better off with two consecutive short-term fixed rates. Take advice.
- Don’t forget base-rate trackers. Most of the discussion around mortgage rates is how cheap fixed-rate deals are. But with base rate at 0.5 per cent and no sign of it rising anytime soon, a cheap tracker can offer excellent value. Often these deals have no penalties so you are free to pay down as you like or you could switch to a fixed rate if interest rates start to rise. However, if you can’t afford to be wrong – that is, if rates rise you would struggle to pay your mortgage – then a fixed rate makes sense.
- School fees can create a huge problem for borrowers as banks no longer regard them as discretionary spending but as a full credit commitment like a car loan or credit card payment. The pressure this puts on the affordability calculation can be massive and throw off some borrowers by hundreds of thousands of pounds that they would have been expecting to be able to borrow. The best advice is to speak to an independent broker before applying for a mortgage as lenders view school fees differently, with one lender taking a very dim view on affordability and others looking more closely at how long these fees have left to run. In some circumstances, if the borrower can show significant enough assets to cover the fee commitment for a period of time then the lender will take this away from the calculation altogether. Alternatively, if there are large bonuses these can be used to cover the commitment.
It is worth speaking to an independent mortgage broker such as Anderson Harris, as criteria are tighter since the Mortgage Market Review was introduced and if you haven’t taken out a mortgage for a few years, you will find that you will be asked many more searching questions regarding affordability.