Within a mortgage product, you will discover that there are several remortgaging options. The best remortgage deal will depend entirely on your individual situation. The fact each person’s circumstance is slightly different means that there are an abundance of remortgage deals to suit. The best remortgage deal for you may mean your monthly repayments are fixed so that they stay the same each month. However, you may prefer a fluctuation based on the variable rates on offer. The main types of remortgage deals are as follows:
If you’re considering remortgaging with a tracker mortgage it’s important you understand how it works. Tracker mortgages track the Bank of England base rate, applies it, and adds an additional set percentage rate. For example, if you select a remortgage deal with a 2.5% set percentage rate from the lender and the Bank of England’s base rate was 0.3%, your payable mortgage deal would be 2.8%. However, if the base rate dropped as low as 0.15%, you would benefit from a reduced rate. Although the same applies if the base rate rises, making it more costly.
Fixed rate remortgages could stabilise your monthly payments to the same amount each month, regardless of what’s happening to the Bank of England base rate or the property market. This can give you peace of mind. When arranging your remortgage deal, you can agree a set rate for a certain period. Typically, this fixed rate ranges from two to five years. It is possible to fix it for longer, should you want to, however, it’s advisable to asses the market every so often to see if you can secure a better remortgage deal.
Discounted remortgages offer an upfront discount off the lender’s Standard Variable Rate (SVR). This is usually for the first few years of your mortgage deal, before it switches back to the SVR. Your lender’s SVR is subject to change, making your payments increase or decrease throughout the term of your mortgage deal.
Remortgaging to a capped rate mortgage means you will be on a variable rate, so your monthly repayments could fluctuate. However, the rate can be capped so that it will never go above a certain limit. You may choose this remortgage option, if you are under the impression that mortgage rates will fall, so you can reap the rewards. But, at the same time, if you want that added protection, there’s a cap in-case they increase.
The idea behind an offset remortgage is to use any savings you have to reduce the amount of interest you pay overall. Imagine you have a £250,000 mortgage and £45,000 in additional savings. You can offset these savings against your mortgage so that you only pay interest on £205,000 of your remortgage deal. The savings are still accessible whenever you choose, but that’s what makes rate on offset mortgages slightly higher than standard mortgages.
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