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Page 17: Financial: Re-mortgaging.

If you are making a mortgage payment each month on your home, you could save between 15 and 30% of your monthly payments by remortgaging and, with some lenders, re-mortgaging could be totally FREE. You don't have to move home to remortgage, you simply switch lenders. And these days the process really has been made simple by the way the lenders have created "Remortgaging Packages" for potential new customers.
For people looking for their first mortgage, please refer to our "How to...Buy a Home and get a Mortgage" page.

Please read on.

At Money Surgery we recommend that anyone who pays rent should consider having a mortgage instead. While the differences in monthly payments can be compared endlessly without a clear judgement being made, the fact that in 20 or 25 years the house becomes yours is an enormous advantage. Additionally, the price of property generally has exceeded inflation, so the value of the home should be much more than when you paid for it. That said, the cost of mortgaging, or renting, is typically the single most expensive regular household bill. Thats why we consider a cut of say 25% in that bill to be so important. You need to check exactly how much you pay per month with your existing lender and the total amount of the loan. Then you need to find out whether your lender will penalise you for paying off their mortgage before the end of the term, called an early redemption penalty.

Please read on.

This is a typical step-by-step guide to the remortgaging process:

  • Scan financial papers, teletext, adverts for attractive remortgaging deals.
  • Talk to as many potential lenders, and impartial advisers as possible.
  • Once you find a deal you are happy with, complete an application form with that company.
  • Appoint a solicitor or use the lenders FREE mortgage transfer service
  • Valuation gets carried out, this too should be free.
  • References are obtained by the lender.
  • The lender makes a formal offer.
  • The solicitor undertakes the legal work involved in the mortgage transfer (This is typically the longest part, and the most frustrating).
  • Buildings insurance arranged.
  • The new lender arranges for the existing mortgage to be repaid
  • Solicitor, poor thing, eventually completes the legal work.
Obviously, this is simplified. Most of these points are covered in greater detail on our Buy a home and get a mortgage page.

Avoiding another deposit:

To avoid the possibility of having to find a deposit or paying a Mortgage Indemnity Guarantee, the loan should be worth less than 75% of the property value. After a few years since purchasing your home, the value should have risen enough to cover this, certainly in the late nineties. If it hasn't, it may be worth re-calculating all the figures to see if delaying the re-mortgage might be more sensible.

Please read on.

Cheapest Mortgage Revealed

(22:00 Monday 4th July 2005)

The cheapest mortgage lender is, according to, and the worst was The Mortgage Business. On a loan of £100,000, in the 12 months to 1st July 2005, the interest charged by was £5,697, compared with £6,857 charged by TMB. However, the survey was based on lender's Standard Variable Rates and ignored any special deals.

The top five cheapest lenders were egg, HSBC, First Direct, Intelligent Finance and Nationwide Building Society. The survey revealed that building societies and direct lending companies were significantly better value than high street banks: Barclays, Lloyds-TSB, Royal Bank of Scotland and Halifax all finished in the bottom half of the league table. If only they could be threatened with relegation.

The difference between the best and the worst, and The Mortgage Business, on a loan of £100,000 over 12 months, was £1,160. This isn't far away from the £1,200 we identified as the saving from not paying-off your mortgage in our article Mind the Mortgage/Savings Gap, below, for the same loan amount over the same 12 month term. The message is clear: shop around and save a small fortune. Home loans can be the cheapest form of lending and are also the largest lump sum that most of us will ever have to sign a contract for. The low rates offered by can be bettered by regularly remortgaging with the best available short term discount offers too, in our opinion, so you could save even more.

Cashback Mortgage Bashers

(Friday 19th December 2003 news story)

An article in the otherwise excellent web site was slightly scaremongering regarding cashback mortgages. These could be viewed in the same way as Endowment Mortgages if people believe everything they read. They state: "...So, unless you desperately need money to furnish or redevelop your home, give cashback mortgages a miss. As my American uncle would say, they're "short-term cherries, but long-term lemons!"

Unfortunately, the only way to work out what mortgage is best for you is to work out the plusses and minusses of every deal available, based on your own personal circumstances and mortgage amounts. To disregard a particular type of mortgage product simply narrows the field but could strike off the deal that is potentially the best for you. If the writer of the article intended to highlight the longer term tie-ins that would obviously accompany any type of up-front cashback deal, then this would be welcomed but it went a little too far.

At the Surgery, many patients recommend sifting through the entire market for a mortgage or remortgage. It may sound arduous but once you've discounted those lenders that are limited to other geographic regions, or offerred by lenders that you don't like, for example non-mutual organisations, and you've worked out that avoiding arrangement fees etc. might be better suited to your personal circumstances, the field becomes considerably smaller. That way, you get the best deal. Cashback... or otherwise.

Nott a Bad Mortgage Deal

(Sunday 30th March 2003)

There's a great new mortgage product on the market from Nottingham Building Society. As long as you lay down 25% deposit, you can get a 1.88% discount off Nottingham's standard variable rate of 5.44% for 3 years. At the moment, that's 3.56%. There's also a free valuation and a £250 Cashback. Click Nottingham BS for full details or call the Nottingham on 0115-948 1444

Record Mortgage Lending

(Wednesday 1st May 2002 news story)

Mortgage lending rose by a record £4bn in March to reach £389.4bn, according to the latest figures from the British Bankers' Association. And total advances were £10.9bn. Figures for March from the Council of Mortgage Lenders also showed advances were at an all-time high, up 25% on February.

Mortgage applications are continuing at high levels and as a consequence over the last few weeks an increasing number of lenders have been making their products less competitive simply to reduce the inflow of new business. Lending for purchases was up by 37% last month, whereas remortgages only increased by 11%. With the average purchase case involving a lot more work and servicing than the average remortgage, this sharp increase in purchase business has caused a servicing headache for some lenders.

Money Surgery suggests that applicants allow extra time for the mortgage to be processed, or, if time is a premium, only deal with companies that are having no application overload. Consider using an independent broker to get the latest and best deals.

Flexible Friend or Foe.

(Sunday 16th September 2001 news story)

Control is a word used to sell a lot of financial products these days. The flexible mortgage is frequently sold as a product allowing more control over your finances. They pool all your accounts, credit card, current account, personal loan, mortgage in one place with the overall savings offset against the debt, all on the comparatively low daily calculated mortgage interest rate. They also allow mortgage overpayments and payment holidays. Flexible mortgages come in two varieties: The "Current Account Mortgage" and the "Offset or Integrator Account". However the Current Account Mortgage, as offered by Virgin One, Yorkshire Bank, Clydesdale Bank, can actually give you less control over your money and cost you more each month because the account works like a massive overdraft so you can't see what has gone where. The result is that debts risk increasing rather than decreasing and the payment holidays might be too easily used. Also the rates on such schemes are higher than traditional discounted schemes. Virgin One's variable rate is currently higher than 6% at a time when many lenders are tempting us with 5.5% fixed for the entire term of the mortgage.

Offset versions of the Flexible mortgage, like those offered by IF, egg and Woolwich, allow greater control because each account remains separate but is linked so that the overall debt can be reduced and you can see how much is in each account promoting a reduction of overall debt. At MoneySurgery we think that Flexible Mortgages can make sense for those of us on variable incomes. Assuming a consistent income, the discounted mortgage is our personal preference, though. Any savings should be directed to accounts offering the best interest rates and any credit card and personal loan debts reduced as a matter of priority. There's little point having savings AND debts. Savings really should be used to pay off these credit cards and loans. Similarly, pooling all ones accounts with a single company makes little financial sense. The banks are desparate to get a single account with you, no wonder they are marketing four or five accounts in one. Shop around and go where the best rates are. Make them more competitive, don't accept their distinctly average rates. The more astute amongst our patients have realised that by NOT paying off the mortgage and saving their excess money in ISA's and other higher rate accounts they get more savings interest than they are paying on their mortgage.

The goal shouldn't be to get the same interest on loans as savings but to get a better interest rate on what comes in than what goes out.

Mortgage Arrears Fall.

(2001 news story)

Mortgages and repossessions fell to only 1 in 500 last year as inflation and unemployment levels come down. As interest rates also come down the Council of Mortgage Lenders worries that this may revive a complacency culture amongst borrowers. Its recent research found that only 5% of borrowers worried about meeting payments if their job ended. 42% felt that their savings would tide them over.

At Money Surgery we recognise that things can change quickly. We are already witnessing worldwide stockmarket jitters based on expectations of an American recession. Tomorrow any one of us may be out of a job. So make sure that those debts are cleared and that you have a few grand at least saved for emergencies. Prepare for the worst and make sure that, come what may, your most valuable possession remains yours.

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