Remortgaging: switching lenders could save money

Remortgaging is an important consideration for homeowners. If you’re on a fixed-rate mortgage, you will probably want to consider remortgaging at the end of your fixed period, and even if you’re on a variable-rate or other type of mortgage, you will probably want to consider remortgaging at some point.

In the right circumstances, remortgaging can be a great way of reshuffling your finances and potentially saving money. But according to a new survey by Cheltenham & Gloucester, many homeowners are unclear about what is involved in remortgaging.

The report’s findings include:

• One in three remortgagers do not realise they are able to switch to another lender
• 37 per cent of homeowners would not consider switching to another lender for fear of being rejected
• 30% would rather pay a higher interest rate than risk rejection by another lender
• 15% don’t understand how mortgage lenders decide eligibility
• 44% are worried about the perceived scarcity of deals
• 38% worry they may not be able to afford their new rate
• 38% will spend less than half a day shopping around for a remortgage deal
• 27% don’t want to tie themselves into a deal now when interest rates may fall at a later point

The findings would suggest that a lot of people are simply happy to stay with what they know - but Melanie Taylor, Head of Corporate Relations for Think Money, says that this means many people are missing out on some potentially significant savings when remortgaging.

“Mortgage deals are changing constantly, and especially in the current market where mortgages are being offered much less frequently, some lenders are being very competitive,” she said. “By remortgaging, homeowners can often make large savings on their monthly payments.

“Remortgaging should be treated in the same way as when you first took out your mortgage. Take your time to look at the market, look for the best deal, and go with that deal. Just a difference of half a per cent on your interest rates can make a noticeable difference to your outgoings.”

The figures speak for themselves. On a mortgage of £120,000 with a fixed 7% interest rate, monthly payments come to £858.10. Take the interest down to 6.5%, and your monthly payments are £819.81 - a saving of almost £40 per month, or £480 per year.

Taylor said: “Remortgaging is particularly important to those on fixed-rate mortgage deals, since at the end of the fixed-rate period, the interest rate usually switches to the lender’s SVR (Standard Variable Rate), which can potentially be higher than the fixed-rate.

“Variable-rate mortgages can often be cheaper than fixed-rate mortgages, but there is an element of risk involved, because the rates can go up at any time and this can make monthly payments much more expensive.”

When you get your final working years of your career you do not have to draw your pension fund instantaneously. Instead, you could decide to defer obtaining a retirement income until the prime old age of seventy-five & if you do so you may well discover you get a more lucrative deal. It is called income drawdown. For more information about Pension Drawdown, visit First Place Financial today!

When you are aged between 50 and seventy-five you are automatically entitled to defer the attainment of your retirement allowance from one of a number of insurance companies. Instead, you are allowed to draw up to 120% of the pension that could have been procured using Government Actuary rates, and leave the remaining cash invested for when you require it. On your side, all you should do is to make sure you buy an annuity by the point you’re seventy-five years old.

Although, what would occur if you opted to take the income drawdown option, & then passed on? If this did take place then your current spouse or dependant(s) would then get 3 decisions: either to agree to a lump amount, less tax at thirty-five percent, or persist with income taking out, or procuring an annuity pension with the cash. Your current other half has until they arrive at sixty to put-off the attainment of an annuity, though no benefits are payable in the meantime.

Why decide on income draw down? Well principally because it could result in you earning a healthier income from your pension by doing so. Secondly, you are able to decide precisely when you want to buy the annuity, thus if you retire at a point in time when annuity rates are considerable low, waiting might be a smarter decision. If the outstanding funds rise as supposed to, then collectively with the reality that the annuity rates mature with age, you might ultimately be able to procure a superior pension than you might have acquired in the beginning.

Besides, it also means that when you die your other half or those legally responsible will gain monetarily, because they are lawfully entitled to the residual assets, as mentioned earlier.

Like all financial investments, there are hazards subsequently though. If venture performance on the remaining stocks & shares is bad, then the extent of retirement settlement provided might plummet. And it is critical to be aware that there’s no reassurance that the pension got will ultimately be bigger than the entire amount that could have been got at the start.

High end home foreclosure listings have spiked in recent months. This is evident of just how bad the real estate crisis is, and that it is not just middle class families who are being affected. Not only are these prime borrowers failing behind on their mortgage payments, but also car loans, credit cards, and property taxes. You would think that this paves the way for more legislature and creatively, legal mortgage products that will help to turn this crisis around. While the government has quickly bailed out large companies who were in a financial pinch, it has been slow to aid homeowners whose tax dollars were probably used to help the corporations.

With the growing number of home foreclosure listings, you begin to wonder what some of the additional fallouts related to this crisis will be. One thing that comes to mind is that the decrease of home sales has got to affect real estate agents. Many of these agents sold homes full-time, and now that there are more stringent loan approval rules, this affects the number of potential buyers who can be approved. Also, banking institutions that granted the loans are reporting huge loses because people are defaulting on loans. Potential buyers who can qualify under the new rules are required to put more money down before purchasing. This may delay their purchase if they do not have the full amount.

If your like many, you don’t always understand what people are talking about when it comes to loans. Without understanding the basic terminology when it comes to loans you just aren’t setting yourself up right to make an educated decision when it comes to applying for a loan. There are hundreds of terms; Below are some of the most important:

Assets
Assets can be described as anything that holds value. Assets can be all types of things from cars to houses. Assets can be used in helping to build credit. For example if you are applying for a house loan, you might use your car as an asset, to show that if you default on a payment, that you have assets to fall back upon such as your car.

Capital
Capital can be a bit of tricky term as it can be used in several different situations to do with finances. Capital can be described as the assets that are available for use towards creating further assets; it can also apply to the cash in reserve, savings, property, or goods.

Debt
Debt is amount of money or something of value that is borrowed from a person referred to as a debtor. Usually a debt that is borrowed will carry some type of penalty along with the payback such as an interest, or service.

Debt Consolidation
Debt Consolidation is replacing multiple loans with a single loan that is normally secured on property. This can often reduce your (the borrowers) monthly outgoing interest payments by paying only one loan which is secured on the property sometimes over a longer term. Because the loan is secured, the interest rate will generally be considerably lower.

Equity
Equity is the difference between the value of a product (for example a house) and the amount that is owed on it.

Liabilities
Liabilities refers to the sum of all outstanding debts in which a company or individual owes to it’s debtors.

Principal
Principal is used to describe the amount of money that is borrowed without including any interest or additional fee’s.

Term
Term refers to the length of a debt agreement. For example if you were to take out a loan for a house over 10 years. 10 years would be the term.

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Ryan Fyfe is the owner and operator of Loans Area. Which is a great web directory and information center on Loans and related issues like Debt consolidation and Credit issues.