With the mortgage rates currently 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 mortgage broker to see if there are cheaper mortgage rates on the mortgage market for you?
Maybe, maybe not. It’s not always that simple in the world of financesand that’s the reason that whether you are looking at mortgage tables online or by visiting banks, you should always seek free, independent advice from a mortgage advisor. Don’t just swap mortgage rates because your new bank tells you they have a better mortgagedeal. Don’t just find a lower interest rate on the internet and apply for it, thinking all will be well once you have completed your new loan.
Why might it not be a good idea in all cases? Well, one of the first fact finding questions a mortgage broker will ask you may be about any tie-ins you have with your current mortgage product. If you move your mortgage now, will you have to pay any financial penalties to your current lender? These could be quite significant costs. If the penalty is to pay a few months’ interest just to get out of an existing deal, then it might require you to reduce your monthly repayments a lot in order to recover the extra expense, and this might not be possible in the long term.
Assuming that your current mortgage has ended its comfy initial introductory period and you are now on the standard variable rate product, 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 warnings, should be discussed and worked through with along with other help and advice from your mortgage broker.
For example, you will need to consider 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 since you took out your current mortgage, maybe meaning that your new level ofborrowing will be an even larger proportion of the house price than when you took out your current product? These might mean that banks won’t be as happy to offer you a mortgage, or at least not as good an offer. You could be shoved onto a more expensive product because of a change of circumstances.
And even these aside, there are arrangement fees for your new mortgage, completion fees, other legal fees and maybe survey fees on your own property. All of these have to be paid for. Pay for them up front as you arrange a new mortgage, and then you have to work out what the long term impact is effectively and decide if the saving in the offer period outweighs the costs involved . Add them to your mortgage and you end up paying more each month.
Either way, reducing your monthly mortgagerepayments isn’t just about finding lower 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 position.
Access expert tips about free Forex signals – your individual knowledge pack.
RSS FEED
