Because Swapping Mortgage Rates Sometimes Isn’t The Best Way To Reducing Outgoings

How Swapping Mortgage Rates May Not Be The Best Way To Saving Outgoings

Many homeowners are finding their current mortgage products coming to an end and are thinking about moving to a new mortgage to save outgoings. But is it always the case that a lower rate mortgage costs less in the long run?

On the face of it, if you can decrease your monthly mortgage payments by half a percent then you could be saving yourself a lot of monthly expense. This could be a saving that you can spend elsewhere or if you are unlucky and expecting a huge rise in mortgage outgoings, just a reduction in the increase of the monthly cost.

Using mortgage comparison charts tell you what mortgage is the cheapest on the market right now, but is it available for you? More importantly, will it actually reduce your outgoings in the future?

Although interest rates have crashed at the moment and are expected to stay low for some months, some analysts believe a drop is on the cards in the near future. So if you lock into a 2-year, 3-year or longer mortgage with a fixed rate, by the end of the term you might be paying more than a variable mortgage if you had stuck it out.

On the other hand, we may be surprised by a recovery and interest rate increases and then you would be better off. That’s the nature of this game. But this isn’t the only area in which you could be spending a lot more than you need to.

Look carefully at those best remortgage offers that you see in mortgage charts and read the small print. Look for the upfront fees – arrangement fees, legal fees etc. Take a look at your existing mortgage, how much is involved in closing that? There may be exit and deed release fees. These fees may also exist in the new mortgage – are they significantly higher than now – that’s the same as a cost for the future?

When you look at these costs, how much will you be paying to switch your mortgage? Many banks allow you to add this to the borrowing, but then you are paying further interest on them for the duration of the mortgage. Even more outgoings each month!

If you are able to pay these fees at the time of the move then in the long term that way is going to be more cost effective. But then look at your existing mortgage. If you are having to pay ?2,000, maybe even more to switch mortgage, could you instead pay off a small chunk of the mortgage, or at least put that cash away in a high interest account instead? Then take a look at how that would reduce your payments – or work out what your net payments are after the money put aside earns some interest.

Changing to a new lender may not always be the right thing to do. First, speak to your lender and see what monthly charges they can get you down to with your existing mortgage. Then, instead of relying on tables to try to compare mortgage rates, speak to a few mortgage brokers and get them to do all of the calculations for you and write down exactly what you will be left paying each month.

Access crucial tips in the topic of free Forex signals – your own knowledge base.