FISCUS MORTGAGES - INFORMATION AND ADVICE

Disadvantages of Remortgaging

Paying fees and charges - The most obvious (and probably largest) fee will be the redemption penalty charged by your existing lender should you decide to switch your mortgage to another provider. You should always check to find out how large a penalty this will be, as it can vary greatly between mortgage lenders and products.

Other fees involved may include (but not be limited to) property valuation fees, legal fees, administration and arrangement fees and any other “unusual items”. This is certainly something to think about before a remortgage, but remember that many lenders will offer to pay many and possibly all of these fees if you switch to them.

Potential loss of loyalty discounts - Some lenders, realising that borrowers remortgage after introductory periods to save money, now offer interest rate discounts as a way of retaining homeowners in the longer term. These are usually discounts on the standard variable rate (SVR), such as National Counties Building Society’s 0.9% discount after three years. Some lenders have specialised teams within call-centres that will offer last-ditch deals to customers that threaten to remortgage with another provider, and many of these deals will not be advertised or be offered in branches.

However, many of these loyalty discounts can be poor value. In fact, some competitors’ these discounted rates can often be matched by the SVRs of low-cost competitors such as Egg and First Direct. The best option is usually to speak to an Independent Financial Adviser (IFA) that can find the best available deal on the market, taking into account your current circumstances. If you complete our short enquiry form, we can have an IFA contact you within 24 hours.

Time taken to arrange best deal - There is obviously the time involved in searching for the best mortgage deal. This can be greatly reduced by speaking to an IFA that can help you with your search. However, once the best mortgage for you is found, there can still be considerable delays while the various contracts are arranged. This can lead to a state of unease amongst remortgagers as they wait for all the changes to be carried out. This apprehension is understandable, after all, your mortgage is likely to be your largest financial commitment and you would obviously prefer it to be completed as soon as possible so you understand where you stand.

Temptation to spend “unearned” extra cash - This comes down to a combination of discipline and need. Sometimes there is a need to use money from your mortgage to pay for items that are not necessarily going to add to your equity. However, in many cases it is more likely to be a result of undisciplined spending. This does not necessarily mean the individual heads out to the local high-street on a reckless spending spree, but more likely ends up spending slightly larger sums of money over a time.

This may happen through spending a little more on a night out than you normally would, buying yourself a few more clothes than usual or perhaps treating yourself to a gift such as electrical equipment like a new DVD player. The best way to control spending is to keep a note of all your purchases for a period of time (say, a month) and then look back at your spending. Are there many unnecessary purchases? Are there any ways you could have saved money?

Longer repayment period - The beauty of consolidating debt or remortgaging is the idea that you can save money through a lower interest rate. This is certainly true, but the period of your loan and therefore the length of time you will pay interest must also be considered.

Even if a switch in mortgage leads to a noticeably lower APR, if the remortgage leads to an increase in payment period of, say, 5 years, then the total interest paid on the mortgage can suddenly add up to a considerable sum. When remortgaging, it is imperative you bear this simple fact in mind: as well as rates, work out how much your total debt and interest obligations will be over the period of the mortgage.