Two minute guide to... Re-mortgaging

Why should I re-mortgage?
We all try to get a good deal for ourselves, whether it's getting cheaper car insurance or buying our cornflakes on a "buy one get one free" at the supermarket. However, re-mortgaging is often the best thing you can do to save a substantial amount of money.

If you’re paying your mortgage lender’s Standard Variable Rate, then you’re probably paying around one and a half to two percent more in interest than the cheapest deals on the market. If you’ve got a £100,000 mortgage, then you could be paying over £2000 more in interest each year than you need to.

How much are you paying at the moment?
Do you know what interest rate you’re paying at the moment or how much is outstanding on your mortgage? If you don’t, you’re not alone. Check your latest annual statement or call your mortgage company. Find out also whether you’re tied into a special rate deal and if you have to pay penalties if you move your mortgage.

Where can I find the best deals?
There are many mortgage brokers who will help you to get a good deal: some are high-street based, others are online only. Ask if they charge a fee: many will be paid by commission from the lender, others will charge you a fee and may refund their commission to you. There are also many websites that show “best buy” mortgages, as do most of the national newspapers.

When looking at new mortgage deals, don’t just look at the headline rate of interest; you must also take into account the fees that lenders will charge. These can include application fees, legal fees and valuation charges, all of which can make the cheapest headline rate more expensive in the long run than a mortgage with a higher interest rate, but with lower fees.

Of course, you can ask a mortgage broker to do the number-crunching for you, but if you’re comfortable with a calculator it’s easy to work out which deal works out best for you. Don’t forget to think about how long you want a special deal to last for. Do you want the best two-year deal and then re-mortgage again in a couple of years or would that be too much hassle? If so, think about a five year deal.

Can I get a good deal from my current lender?
Once you know what deals are out there, go back to your current lender as they may be prepared to offer you a lower rate. They may even move you to one of their special rates without charging the extra fees that new customers may have to pay. Of course, if they don’t, then it’s time to move on.