Remortgage With A Whole-Of-Market Broker & Save £2,100 A Year

by Vinod Gorasia

If you’re coming to the end of a low-priced, fixed-rate mortgage, you’re in for a big financial shock. Mortgage rates and fees are higher and deals are harder to find. But you can still get a best-buy deal using a whole-of-market broker...

1. Save money immediately - remortgage from a standard variable rate (SVR) to a best-buy (cheapest) mortgage.At the end of a fixed-rate deal, you’ll automatically go on to the lender’s SVR, which will be higher. It’s estimated that the difference in annual repayments between a best-buy mortgage (about 6.0%) and the average SVR mortgage (about 7.50%) is around £2,100 a year.

Find a best-buy deal by talking to a ‘whole of market’ mortgage broker sourced by word-of-mouth recommendation from friends and family. They have access to a fuller range of mortgages including some that are not advertised publicly.

A ‘best-buy’mortgage is usually defined as one with the lowest interest rate. But, it may have lots of add-ons that’ll make it more expensive than anotherwith a higher rate.Take account of the length of any offer period, the rates after the offer period, the arrangement fees and the redemption penalties.

2. Fancy a fixed mortgage deal? Sign up now before they get more expensive. Some homeowners prefer fixed rate deals. These offer the certainty of set monthly repayment costs.You know what you’ll pay and when. In financial terms however, they are a gamble...

The Bank of England base rate is now not expected to come down any time soon and even when it does there is no guarantee that this’ll mean cheaper fixed-rate deals. The main driving force, which determines fixed rates is the LIBOR (London Interbank Offered Rate). This is the rate at which banks lend to each other.

In the current ‘credit crunch’, banks are reluctant to lend to each other because of the perceived higher risks of lending.With LIBOR rising accordingly, it’s more expensive for lenders to obtain funds to lend to home-owners and so fixed rate costs are likely to rise further.

3. Avoid over-paying via add-on costs - watch for the lender’s clawbacks. The media recommend mortgages with the lowest initial rate.This is the basis for their best-buy charts.

Lenders know this so they compete to offer a low start-off rate that will pull in homeowners. But these lenders naturally want to claw back what they are giving away. This often starts with a high arrangement or completion fee.

Many borrowers ignore this because it can usually be added into the mortgage - incurring not only that high arrangement fee but interest on it as well.The lower the initial interest rate, the higher the arrangement fee: up to 4%. And the lower the amount borrowed, the bigger the impact on the overall cost.

4. Prefer a variable mortgage deal? Again, act now to secure the best possible deal. Some home-owners prefer a mortgage with a variable rate which tracks the Bank of England base rate or the lender’s SVR. These products are usually available at a discount for two to five years or more before reverting to a standard variable rate.

Many pundits believe that rates are going to stay much as they are for the foreseeable future. Even if they do fall in the medium-term, you may end up paying the same anyway. Those that are linked to the lender’s SVR may be in for a nasty surprise. LIBOR is a greater influence now and, along with SVRs, is likely to go up.

5. Bottom line advice? Whatever type of mortgage you want, go for it now. Mortgages are scarce and limited to a lower ‘loan to value’ (LTV), tend to be more readily available to those with a clean credit history.

So, take advice, see what’s available and apply quickly for the best available deal. It’s a good idea to complete a general application form with your broker and wait for the right deal.

Check your credit history at Experian and Equifax and correct any errors. Check that you can make overpayments to your mortgage without penalty - little overpayments can reduce the term of your mortgage and interest paid with minimal effort.But...

Look for a mortgage that calculates interest on a daily rather than an annual basis so that any overpayments take effect straightaway. Read the small print of EVERY mortgage offer.

Act Fast: Uncover the best deals by sourcing a ‘whole of market’ mortgage broker.They have access to the widest range. Go by word-of-mouth recommendation or check theYellow Pages.