Lowest mortgage rates
When we first get our foot on the property ladder, getting value for money from the mortgage lender is not always a priority. Many times we are just grateful that a lender will give us a mortgage in time to fund our house purchase before the chain falls apart! In the cold light of post-home purchase however, we can sometimes feel that the mortgage deal we are signed up to just does not come up to scratch. We may feel that the mortgage rates are too high and the insurance policies that we've taken out with the mortgage are too expensive. If you find yourself in this predicament then the answer may lie in re-mortgaging your home.
Re-mortgaging for the lowest mortgage rates is the solution
Re-mortgaging is all the rage right now as homeowners are bombarded with 'lowest mortgage rates' offers from newspapers, TV adverts and the Internet. Promises of huge savings by switching to the lowest mortgage rates available abound, as does advice and information about how to make the switch.
In truth, switching your mortgage to another loan company's lowest mortgage rates does indeed have the potential to save you hundreds if not thousands of pounds each year on your mortgage repayments, especially if you are currently signed up to a standard variable rates mortgage. Over one-third of all homeowners are currently on standard variable rates, the APR of which is typically 6.75%. Fixed rates, capped and discounted rates mortgages on the other hand offer some of the lowest rates around. You can pick up a fixed rates deal today for 4.5%, so reducing interest rates on your mortgage by 2.25% from the typical standard variable rate. When converted to cash this amounts to a saving of over £135 per month on repayments for a £100,000 mortgage over 25 years.
Watch out for the fees
Changing your mortgage over to the lowest mortgage rates product you can find though does not always make economical sense. Both the mortgage company who you are leaving and the new mortgage company with the lowest rates will charge you fees for the loan transfer making the whole process quite costly.
The mortgage company that is losing your custom may levy an early repayment / redemption charge that could be as high as 5% of the mortgage. This can be a deal-breaker, although it is worth bearing in mind that such penalty clauses in the mortgage may only apply to a limited period of the mortgage product that you're signed up to. Additionally, if you opted for a cash back mortgage you may also be required to pay back some or all of the cash if you choose to switch your mortgage while you're still in the penalty period.
On the other hand, the new mortgage company with the lowest rates will normally discount their fees in order to attract new customers to switch to them. In some instances the new mortgage company offering the lowest rates may cover the fees in their entirety. If fees are not covered they could easily run to £1500 or more, and when married with any early repayment / redemption charge could outweigh the costs of moving your mortgage altogether at the present time.