How To Compare Remortgage Deals (It's Not All About The Rate)
20th April 2017
When you compare remortgage deals, remember to check the arrangement fees and other details, as well as the rates. The deals you’re offered will depend on a number of factors, including whether you’re looking for an interest-only or a repayment mortgage, and the length of the mortgage term.
What kind of mortgage do you want?
Remortgaging is the process of taking out a new mortgage to pay off your old one. You’ll need to make some decisions about the type of mortgage you want in order to find mortgage deals and compare them. Your choices will impact the rates you’re offered.
Here are some of the key things you’ll want to consider:
Do you want a fixed, tracker, or variable interest rate?
A fixed rate mortgage guarantees a certain interest rate for an agreed period, making your payments consistent. A variable rate goes up and down according to a benchmark set by the lender. A tracker mortgage is a type of variable rate mortgage, but it tracks the movements of the Bank of England’s base rate. Most often the rate will be set above the rate it tracks, and some lenders will set a ‘collar rate’, which means that your rate can’t go below a certain level.
When you’re comparing remortgage deals, the fixed rates you see may be higher than the initial rates for the variable deals, but remember that repayments on a variable rate are less predictable and you’ll need to ensure you can afford to pay more per month should the rate increase.
Do you want a repayment or interest-only mortgage?
With a repayment mortgage, you pay off part of the loan each month plus interest. The amount you owe decreases, until you own your home entirely by the end of the mortgage term.
An interest-only mortgage means you only pay the interest, so that once the mortgage term ends, the full loan amount still needs to be repaid. If you choose this option you’ll need to ensure you have enough money to repay the full loan amount; this could be from savings or cashing in on an asset such as shares.
How long will the mortgage term be?
The mortgage term is the number of years it’ll take for the mortgage to be repaid. If you have a repayment mortgage the loan is guaranteed to be paid off by the end of the mortgage term.
Do you want to be able to make overpayments?
Some mortgages allow you to pay more than the required monthly amount, helping reduce the mortgage balance and amount paid in interest. This can be a good idea if you receive a lump sum of money such as a work bonus, for example.
Some lenders are more flexible than others. If you’d like the option to sometimes pay more than the monthly repayment amount, you can look for a mortgage that allows overpayments.
Details about you and your home
When comparing remortgage deals, the rates you’re offered will also depend on certain other factors.
Your loan-to-value ratio (LTV)
This is the percentage of the property that’s being borrowed from the lender. Usually, the lower the LTV, the more attractive the interest rate, and therefore the lower your monthly payments will be.
Your credit rating
Lenders use your credit rating to estimate how reliable you’re likely to be as a borrower. Usually, if you have a good credit rating you’ll have a greater choice of remortgage deals, and you may be offered lower rates.
Comparing remortgage deals
Once you’ve made these decisions and you’re comparing remortgage deals, take into account the following:
The initial interest rate
If you’ve chosen a fixed mortgage, this is the interest rate you’ll initially pay. The lower the rate, the lower your monthly payment will be. Bear in mind that you’ll only pay this for a certain period before the lender’s Standard Variable Rate will kick in unless you remortgage.
The length of the initial period
This is the length of time you’ll pay the initial rate for, which is often somewhere between two to five years. You’ll usually have to pay an early repayment charge (ERC) if you remortgage during this initial period.
The Standard Variable Rate (SVR)
Once the initial period is over, your lender will move you onto their higher Standard Variable Rate (SVR), which can increase your monthly payments. This rate may not matter too much if you’re planning to remortgage again once your initial rate has finished. If you use Trussle, we’ll keep an eye on the mortgage market for you and let you know when it makes sense to switch.
The lender will usually charge an arrangement or product fee, which is a one-off amount you pay when you take out your mortgage. You may be able to get a more competitive rate if you choose a mortgage with a higher fee, but the overall cost may not be lower.
Some remortgage deals will come with special incentives. The lender may offer to pay for the valuation and/or the legal fees, for example.
Using Trussle to compare your options
As you can see, there’s a lot to weigh up when you’re comparing remortgage deals. Trussle can help you bypass the hassle of doing all the work yourself. Simply answer a few questions using our online form and we’ll scan the market to find a suitable deal that looks good for you. A qualified mortgage adviser will then get in touch to talk it through, and will explain why it’s the most suitable option for you. We’ll show you all the important details like the initial rate, the Standard Variable Rate, and any product fees. To see how this works before you get started, read How To Remortgage With Trussle.