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Re-mortgage?

Re-mortgaging simply means switching your current mortgage lender to a new one, while still living in the same home.  It’s exactly the same principal as changing your energy provider.  So why, and when, may a change be worth considering?

Moving mortgage to one with a lower interest rate can result in considerable savings over the lifetime of the mortgage.  You can also re-mortgage to a fixed rate for a few years or if you want to release some money from your home.

If you’ve got a good mortgage deal and cannot find a better one then it’s obviously better to stay put. However, do periodically check that there isn’t something better available.

Another reason to stay with your current provider is if you’re tied in to a deal with which you would incur a penalty charge if you switched. However, when your current deal is nearly finished it would be wise to check again.

It may be a good time to move provider if you’re near the end of your existing deal, or if you have had the mortgage a long time and interest rates have come down.  There is also an “equity release” option if you want to take some money out of the property.

Equity in your house is the difference between the value and the size of your mortgage. 

Property Value = £200,000 – Mortgage £150,000 = Equity £50,000 (or 25%)

There are fees involved when re-mortgaging your property.  You will have to pay to exit your current lending and an arrangement payment to join the new one.  There are also survey and legal fees to consider and possibly an ERC (early repayment charge).  However, there are re-mortgage deals available that have low or not set up costs.

Mortgages fall into two broad categories: fixed rate and variable rate. The interest rate you pay depends on the type of mortgage you choose.

Fixed rate mortgages have a set interest rate and last for a fixed period of time - typically 2, 3 or 5 years. Some allow you to fix for longer, perhaps 10 years. You are tied in for this length of time and will have to pay an early repayment charge if you come out earlier.

If you decide to move house in the middle of a fixed period, look for a portable re-mortgage - then you should be able to take the mortgage with you to your new home.

The advantage of a fixed rate mortgage is that you know exactly how much it will cost for the whole period of the loan. The interest rate will not change, whatever happens to rates on other mortgages, whether they go up or down. This is helpful with budgeting for years at a time.

As the name suggests, the interest charged on variable rate re-mortgages goes up and down as interest rates change. You'll not know for certain how much your mortgage will cost in the coming years but, at least to start with, it should cost less than a fixed rate loan.

The rate will be linked to your lender's standard variable rate (SVR), or it can be a tracker mortgage linked to the Bank of England bank rate (known as base rate).

If you want any further information about mortgages please contact us at your local branch.

Equity in your house is the difference between the value and the size of your mortgage. 

Property Value = £200,000 – Mortgage £150,000 = Equity £50,000 (or 25%)

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