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How To Choose The Right Remortgage Among The Many Available

One of the biggest decisions in life is your mortgage. And with so many different products out there, it’s not an easy one to make. This guide explains the types of mortgage and remortgages products available so that you can make a more informed decision.

Types of Mortgage Products: With a number of different types of mortgage product available, the one you select will depend on a number of factors including your own aims and objectives and your current financial circumstances.

Fixed Rate Remortgages: As you might expect, fixed rate mortgages will fix your monthly repayments for a defined period of time. Whilst most fixed rate deals are for 2, 3 or 5 years, some lenders offer fixed rate products for up to 10 years. Whilst they offer guaranteed payments, fixed rate mortgages will often be set at slightly higher interest rates than standard variable rate (SVR) mortgages.

Again, you do need to be aware that there may be high arrangement fees payable on discount mortgages products, as well as early repayment charges during the discount period so if you redeem the mortgage early you’ll have to pay charges.

Discounted Remortgage: A discounted mortgage typically tracks either the lender’s standard variable rate or the Bank of England base rate but offers a discount from that rate. For example, a 0.5% discount from SVR means that you benefit from paying 0.5% less than the lender’s standard variable rate for a specified period of time. Your mortgage payments will increase and decrease depending on what happens to the rate on which your discount is based.

You should also be aware that the rate of interest increases the longer you fix your rate, so for 10 year fixed rate mortgages, the interest rate will be higher than a 2 year fixed rate period. Fixed rates are the most popular mortgage product, with half to three quarters of UK mortgages being fixed. Early repayment charges may also apply while you are in the fixed rate period.

Capped Remortgage: A capped remortgage is a variable rate product where the interest rate that you will pay is capped at a certain level for a specified period. Again, you may pay an application or arrangement fee for the benefit of such a deal.

Offset Remortgage: Whilst offset mortgages are frequently seen as confusing or difficult to understand, the reality is that they can be a great way of borrowing. Offset products link your mortgage to your savings accounts and any balance in your savings is used to reduce the balance you owe on your mortgage.

Offset mortgages are a great means of repaying a mortgage more quickly than would be possible if one were simply making regular repayments each month. It is possible to reduce the term of the mortgage by as much as 5 years, which represents a huge saving. This of course is dependent on how much extra on the loan is being repaid.

If you are looking to remortgage there is certainly plenty of choice as to the types of deal that are available. So, the most important part of the process is to understand the various options that are available to you and to pick the right type of deal for you.

James writes for Just Remortgages one of the UK’s top sites for the latest remortgage rates and remortgage deals

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