With the mortgage interest rates dropping as they have done over recent months, there’s likely to be a lower 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 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 mortgages online or by visiting your local banks, you should always seek advice from a mortgage advisor. Don’t just swap mortgages because your new lender tells you they have a better deal for you. Don’t just find a lower rate on the internet comparison tables 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 questions a mortgage broker will ask you at a first interview may be about any tie-ins you have with your current mortgage. If you move now, will you have to pay any financial penalties to your current lender? These could be quite significant. If the penalty is to pay a few months’ interest just to get you 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 product has ended its comfy initial introductory period and you are now on the standard variable rate product, without any remaining 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 that need to be looked at, should be discussed and worked through with along with your mortgage broker.
For example, 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? 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? If your mortgage value is now more than 75% of the value of your house, a future mortgage could be very expensive. These might mean that lenders won’t be as happy to consider your application and offer you a mortgage, or at least not as good an offer as the one you currently have. You could be shoved onto a more expensive product.
And even these aside, there are arrangement fees for your new mortgage, completion fees on your existing mortgage, other legal fees and maybe survey fees on your property. All of these charges have to be paid for. Pay for them up front, and then you have to work out what the long term impact is effectively. 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 costs and impacts and total up the fees and charges over the next few years if moving mortgage will save you any cash. Ask a mortgage broker to give you a written model, comparing your current position mortgageto your proposed position.
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