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19 October 2015

Why it pays off to review your mortgage

Here, Principality’s Mortgage Product Manager, Christopher Johnson, explains why it pays to review your mortgage.

It’s no secret that the mortgage market is a highly competitive one. New products, new rates and better deals appear all the time, meaning there could be huge potential for homeowners to get better value somewhere else. Regular mortgage reviews are an effective way of keeping an eye on the current market, and could save you hundreds of pounds in the long run.

When should you review your mortgage?

Keeping on top of the best deals and new products isn’t something we’re all able to do week on week, or even monthly. But at the very least, an annual mortgage review is highly recommended. Particularly for people who aren’t tied in to early repayment penalties or on a fixed mortgage rate, it could be well worth your while looking around once a year or even more frequently if you can. 

Aside from a yearly review, another good time to look around for mortgage deals is when market interest rates change. When this happens, it’s likely there will be more competitive deals on offer meaning re-mortgaging could be a cost-effective option. Additionally, you should also look around if your current mortgage deal is coming to an end to make sure that you get the right deal for you.  

If you think you’re likely to forget to review your mortgage, you could set a mortgage review reminder in your diary or phone calendar. Approximately three months before your mortgage deal ends is a good amount of time to start shopping around and get to grips with the current market.

Be aware of the costs

While you could save yourself a lot of money by re-mortgaging, there are many additional costs to be aware of before committing to anything. A common extra cost is early repayment charges. These will occur if you pay off your mortgage before your current deal ends, or if you switch mortgage lenders before your current deal ends.

Also, your new lender might charge you valuation and legal fees, but more often than not these costs are waived if the re-mortgage is successful. It’s good to be upfront about these costs with your potential new lender so you know what outgoings you’ll face.

There will also be inevitable admin costs to consider, so remember to factor these in. These can include an exit fee payable to your current lender, and also booking fees to your new lender. Some lenders offer fee-free deals which avoid these costs, but generally you’ll end up paying a higher interest rate as a result. Again, weigh up whether a fee-free deal is cost-effective in the long run.

Make sure you’re in the know – Get to grips with the new regulations

Major changes in the industry and new regulations could mean it may take longer than you think to have your mortgage approved. For example, new regulations from the Mortgage Market Review (MMR) mean you’ll now need to provide proof of income and outgoings from payslips and bank statements. Many lenders have been doing this for some time to make sure that you can afford your mortgage now and in a higher interest rate environment.  They’ll also check how you would cope with an increase in interest rates or lifestyle changes, such as having a baby or losing your job.

While you might think this will mean it’s harder for your mortgage to be approved, don’t let it put you off re-mortgaging on the whole - as there are potential big savings to be had. Get to grips with these new regulations before you think about re-mortgaging, so you know what you’ll face and avoid any nasty surprises.

Take time to compare deals

Comparison websites are a really good starting place when you begin your search for better mortgage deals. Be sure to compare between the sites themselves, as they might give different offers. It never hurts to do a bit of background research into the products themselves as well, that way you’re up to date with the current offering and able to make a measured decision based on your own needs when the time comes.

But if you are unsure you can always see a mortgage or financial adviser who will be able to discuss your options with you, but be aware many will charge for this service.

It’s important to take time and weigh up your options. Most importantly, keep regularly checking for mortgage deals out there; it could well pay off in the long run. Re-mortgaging could be hugely beneficial to your bank balance and financial security – and not acting upon changing interest rates or regularly reviewing your mortgage could mean you’re missing out on hundreds of pounds of savings in the long run.

Published: 19/10/2015