Remortgaging – Can It Still Be Worthwhile?
Mortgage lenders are calling by insulting name for people who change lenders with lower interest rates – they call them “Rate Tarts”. The author has a much more suitable description – Astute Shoppers! In spite of everything, why should you be subject to implied criticism for getting the best deal? After all money from one lender as effective as money from another!
There is an extreme competition between mortgage lenders. Ever since money is their main offer in their marketing campaigns, they have to give the best price for their prospective buyers. They may be called Rate Tarts, but they are the ones who will be richer. This is the rule in the game called mortgage.
In order to limit switching, some lenders have inflate their up-front charges even as the more enlightened have improved their client preservation programs. In such a competitive market, awards must be given for the best customer preservation programs but increasing up front charge will reduce the lenders market share, although on better profit. It seems that some mortgage lenders still have to struggle in this competition.
For example, Birmingham Midshires now offer a two year fixed deal at 3.89%. It looks like a good deal until you read the small print – they’ve inserted the arrangement fee of £1,499! If you take off this fee over two years at £749.50 per year, that’s equal to an extra 0.75% on a £100,000 mortgage.
So you need to do a little homework if you want to remortgage. First calculate the costs of transferring your mortgage. Remember to insert the legal fees to switch the mortgage (usually about £350 on a £100,000 mortgage), the assessment fee (about £250 for a £100,000 mortgage), the arrangement fee (typically £500), perhaps a booking fee (£50?), and also the cost of any penalties if you repay your existing mortgage.
Now get on the phone to your existing lender.
Tell them that you want to move for a better deal. Except if you put pressure them, lenders often work on the basis that natural apathy will prevail, provided they offer a practically smart deal, – borrowers will be happy to sit tight and avoid the cost, time and trouble of remortgaging. So look for better deals from them. If your current lender just offers you their standard variable rate they don’t warrant your business!
Now you’ve found the best new remortgage deal you qualify for, weighed up the costs of moving and got your existing lender to quote for retaining your business, you can make a full comparison and a clear decision.
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