Re mortgage savings UK

The first question anyone asks when thinking about re-mortgaging their property is how much will I save? Unfortunately it isn't the easiest question to answer. However, once you've got your head around the variables involved; you should be able to work out an accurate figure with the help of an online mortgage calculator.

Before you get to work, you'll need the following information to hand:

Property Value : Properties must be independently valued before they can be re mortgaged. If you're just after a ball-park figure (to see whether or not it makes financial sense to re mortgage) your local estate agent should be able to help.

Mortgage Redemption Statement : Ask you current loan provider for a mortgage redemption statement, which will have details on your remaining mortgage balance and repayment term. You'll also find details of any redemption charges that must be paid off before you can switch mortgages. It's important to remember that some lenders charge an additional fee for cancelling your loan agreement.

New Mortgage Loan : How much you want to borrow depends on whether you are simply looking for a more competitive interest rate, or want to free-up equity. If your new loan is for more than three quarters of your existing property's value; your new lender may insist that you take out mortgage indemnity cover.

Once you've got all the details, plug them in to a mortgage calculator (such as the one below) and wait for the numbers to be electronically crunched. The chances are that you'll be surprised by the savings that can be made. Here's a hypothetical example:

Mr. X is thinking about re mortgaging his property. His outstanding mortgage balance is £25,000 and he's got 8 years left 'locked in' to a standard variable rate mortgage at 6.82%. If he changes loan provider he faces penalties of £750. However, as his new fixed rate mortgage is set at 5%, switching still makes financial sense. In fact, it represents a net saving of £ 3457.2

SVR monthly repayments (7.82%): £ 360.05

Total repayment over 8 years: £ 35464.8

Fixed Rate monthly repayments (5.25%): £ 325.60

Total repayment over 5 years (£ 31257.6) plus £750 costs: £32007.6

 

 

 

 

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