Buying a house for most people is the single biggest purchase you make in your lifetime. And the biggest line in the monthly budget. You may buy two, maybe three houses over the course of fifty years, and that’s it. For hundreds of thousands of pounds each. Which you will repay over dozens of years. So look out, not being careful about your mortgage can cost you thousands. A little difference in your interest rate, such as 0.25% doesn’t seem like much, but since the term of your loans is so long, it makes a real difference. One solution is to check every year or so that you are on the best mortgage deal possible, and if not, look for a refinance. Interest rates move all the time, and bank offers change as well. Sometimes, banks will have “sales” where they will wave the application and processing fee, sometimes they will have a very low spread over the base interest rate, or a great deal if you fix for 5 years. It really depends on what you are comfortable with, and you should bear in mind that if you go on a tracker rate, your mortgage payments might go up and down with the Bank of England’s base interest rate fluctuations.
So how do you go about refinancing? It’s very simple. Look at what you owe, and the term of your mortgage. You should be able to find that information on your last statement, or by accessing your online banking. Once you have that, you should look at what your house is worth. When you bought a house valued at £100,000, if you got a mortgage for £80,000, you got a 80% loan to value mortgage. The bank lent you 80% of the price of your house, put simply. If your house is now worth £120,000, you have lowered your loan to value. And you have lowered it further by making mortgage payments every month. So you may have a loan to value of 65% or less. Which means you are able to get a much more favorable interest rate on your mortgage. Want to go the quick and easy way? Just call your own bank, and ask them to better their terms. You shouldn’t have to provide any additional paperwork, since they underwrote your original mortgage, and they have to approve you if you have made payments on time until now, since the new payment will be lower than what you are used to making. If you have a few more hours, look at other banks. Short on time? On Loanable.com you can submit your one application to a wide variety of lenders, with no up front fee. You just enter your details once, and they try matching you with a lender that will undertake your mortgage.
Refinancing your mortgage is just step one in making sure you are not paying more than you should on your overall debt. You should also look into your credit cards, and move your balance to a 0% interest card if you are carrying one, then tackle student loans, car loans, personal loans, etc. While the amounts you owe on these are probably lower than your mortgage balance, because the debt is not secured against a property, it carries more risk for the lender and as such a higher interest rate. So it is well worth looking into as well.
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