How you could save thousands on your mortgage – but be aware of risks

SAVINGS

Save thousands on re-mortgaging as rates are at an all time low (Image: GETTY)

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Remortgaging can seem like quite a complex process, but the potential returns make the process one that Britons may wish to consider. However, there are things to be aware of before starting the application such as hidden fees which may end up costing people more than they intended.

On the Cash Chats podcast, Andy Webb discusses the risks that Britons should be aware of before they consider re-mortgaging and changing their fixed rate for a lower one.

He said: “A low rate is fantastic. “If you’re currently paying three percent and you can get one for 0.8 percent then that’s a huge saving, a huge discount you will be paying on interest.

“But these low fees might come with an arrangement mortgage. Many mortgages now come with some type of fee.

“You need to factor this into the remortgaging because it could be that there’s a deal with a lower fee but a higher rate which actually works out that when you add it all together, it works out better for you.

READ MORE: Pensioners could be missing out on a boost of up to £358 per month

SAVINGS

You may end up saving more on deals with a higher rate as the arrangement fee’s are lower (Image: GETTY)

“So don’t just go for the lowest possible rate out there.

”When making these calculations, Britons should be comparing the prices of the fixed rates over the time period they may want it for.

“Such as over two years, or five years, not the whole mortgage term.”

Furthermore, Mr Webb mentioned the possible increase of the rate once the fixed term is over.

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When remortgaging, Britons should think carefully about how long they want the fixed rate for.

Even though a two-year fixed rate will be lower than a five-year fixed rate, one may seek comfort in the fact that for a longer period of time they have a steady rate that may work out cheaper than if they change it after two years to something different.

Mortgage rates go up and down so after the two-year fixed rate, the rate one may pay next could be a hefty increase.

Mr Webb said: “You do have to be careful with fixes, particularly the longer ones. I’m not saying don’t do them as they can be great if you want that certainty, and you want to lock in the rate.

SAVINGS

Always look around for the best deals and do the maths to save money when re-mortgaging (Image: GETTY)

“But there is the risk that as rates continue to be low or drop even further and you’re locked in at a higher rate, you can’t do much about it, unless you have exit fees to leave them early.

“That also plays into not just if you want to change your deal, but if you want to leave your house, you might have to also pay this early termination fee which could be quite expensive.

“So have a look at all these things, what the terms are on your existing mortgage and the new ones.

”Another thing Britons may want to look out for when shopping around for a lower mortgage rate is to find out if you can overpay the mortgage and if so, how much.

It may be valuable to go for a mortgage with a slightly higher interest rate but that allows one to make unlimited overpayments.

He added: “If you really wanted to, say you got a pay rise or windfall, you could make a dent on that if you wanted.

“It something certainly to think about.

”When looking to remortgage, Britons may wish to start looking three months before their deal ends as it can take time to get their process approved.

Mr Webb concluded: “Even if you’re not due to re-mortgage right now, have a look, see if you can try and get one of those low rates that are going if it works out for you.“Do the maths and make sure that it is the best deal.”

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