• Make sure that the new mortgage you choose is available to homeowners who are remortgaging as not all of them are.

• Most people should choose a Repayment Mortgage over an Interest-Only one as there’s no risk of shortfall then.

• Check if the lender charges interest daily, this is better as the amount you owe becomes less every time you make a payment, meaning you pay less interest than with a lender who calculates interest annually.  Annually means that 12 months worth of payments have to be made before the amount you owe is reduced.

• Using a Mortgage Broker can save you a lot of hassle and open up deals that wouldn’t be available to you as an individual.  Opt for a ‘whole of market’ broker, they may be free or charge you for the service so check first.  Do still check some other deals yourself though, as some lenders don’t offer their deals through brokers.

• Your lender may offer to add buildings insurance and Mortgage Payment Protection Insurance to your monthly payments.  If you shop around and buy them separately you are likely to save money even though some lenders charge a fee if you decline their insurance.

• If money is particularly tight, a fixed rate deal means that during the fixed rate period you won’t have any nasty surprise increases in your monthly payment if interest rates should rise.  Don’t forget though that when the fixed rate period is over, your payments could increase significantly if interest rates have risen.

Disclaimer-

This guide does not constitute financial advice.  Anyone seeking financial advice should seek appropriate professional advice.

Mortgage Brokers

It can save a lot of time and hassle if you use a mortgage broker to find the best deal for you.  They may also be able to obtain mortgage deals that are not available to individual customers.  The type to choose is a ‘whole of market’ broker, as others may offer a limited selection of products and not include the most competitive deals.  Some may charge a fee, however others are free and make their money from commission.

Interest-Only Vs. Repayment

Despite the large number of different mortgages, they can be divided into two types-  Interest-Only and Repayment.  In the case of interest-only products, it’s possible to find yourself with a shortfall if the investment aspect of your mortgage fails to perform well.  This means that you would be responsible for finding the extra money needed to make up the difference between the value of the investment and the amount you owe.  With repayment types you will not risk having a shortfall as some of the money you pay each month goes towards the interest, and some towards repaying what you borrowed.

Types of Mortgage

Some of the different types available are:

Standard Variable Rate- Interest rate varies as it’s linked to the Bank of England’s interest rate.  Drops in Bank of England interest rate may not all be passed on to you however.

Tracker- Follows changes in Bank of England interest rate exactly, but some types may have a minimum interest rate below which they won’t drop (known as a ‘collar’).

Fixed- The interest rate is fixed for a set period, from a few years up to 25 years.  If rates have increased during your fixed period, your payments might increase greatly when the fixed period is over unless the fixed rate period covers the whole length of the mortgage.  Also, if the Bank of England interest rate falls your payments will not.

There are many other types of deals and it shouldn’t be a problem finding one to suit your circumstances. For more information see Loan Mortgage Financing.

Disclaimer-

This guide does not constitute financial advice.  Anyone seeking financial advice should seek appropriate professional advice.

Standard Variable Rate Mortgages

If you are currently have a Standard Variable Rate Mortgage then you are likely to be able to find yourself a more competitive rate of interest elsewhere.  Don’t forget though to give your current lender an opportunity to give you a better rate of interest than they are now giving you, as the rate you are currently on may well be negotiable.  As the saying goes, it’s easier to keep a customer than to attract a new one so don’t be afraid to ask.

Changed Personal Circumstances

If your personal circumstances have changed since you set up your current mortgage then it could be that the product you now have is no longer suitable for your new circumstances and it would therefore be a good idea to shop around for something more suited to your present situation.  For example you may find yourself on a higher salary and want to make extra payments to pay off your mortgage earlier, but are prevented from doing so by your current lender.  Alternatively you might now need a flexible mortgage where you can miss a payment now and again.  There are many different mortgages to suit a multitude of different situations.

Endowment Mortgage Shortfalls

The money you pay to your lender in the case of endowment mortgages is used partly to pay the interest on the loan and the rest is invested hopefully to grow enough to pay off the original amount you borrowed.  If the money that was invested hasn’t grown sufficiently to cover your debt then there is a shortfall which you yourself are responsible for paying.  If you find yourself in this situation, you could be better switching partially or completely to a repayment mortgage, and professional advice would be strongly recommended.

Disclaimer-

This guide does not constitute financial advice.  Anyone seeking financial advice should seek appropriate professional advice.