Many of us have changed one or more financial arrangements from an existing provider to another company to take advantage of a better deal. It could be for a better savings interest rate, a lower credit card rate or to save money on home or car insurance. And yet a lot of people never consider doing the same thing with what may be their largest single monthly expenditure – their mortgage.
When you first take out a mortgage, there’s a tendency to think of your relationship with the mortgage lender as being a long-term arrangement even though most mortgage deals usually tie you to that lender for no more than three to five years. That means after that initial tie-in period you’re free to move your mortgage elsewhere for a better rate. This is known as remortgaging.
When considering remortgaging your property, your initial step should be to find out where you stand with your current lender – what type of mortgage deal (often referred to as a “product”) you are on, and what the interest rate is. This information should be readily available on your annual mortgage statement, but if not just call or write to your lender and they will confirm.
Options to Avoid Paying the SVR
If you find that your mortgage is on the lender’s “Standard Variable Rate” (SVR) then it’s time to look at your options.
As the name suggests, this is the lender’s normal (and usually worst) mortgage rate, offering no discounts or rate caps, and is unlikely to be doing you any favors in terms of the amount of interest you pay each month.
Alternatively, you may find that your current mortgage is already on a specific product with your current lender; for example a fixed rate, capped rate or tracker mortgage. If this is the case, you should check with your lender whether an Early Repayment Charge would apply if you were to repay your mortgage by transferring it to another bank or building society.
Early Repayment Charges are often in the order of hundreds or even thousands of pounds, and as such can add considerably to the cost of moving your mortgage.
Speaking to an impartial, unbiased mortgage advisors like Mather & Murray Financial will help you to explore your options. Many mortgage holders are surprised at how much they can reduce their monthly outgoings by, simply by transferring their mortgage to a better deal with another lender. Even if the saving isn’t massive, that’s still money that stays in your pocket each month, rather than paying interest to your bank … and over a few months or years, it can certainly add up.
As a mortgage is secured against your home or property, it could be repossessed if you do not keep up the mortgage payments.
Some types of buy to let mortgages are not regulated by the Financial Conduct Authority.