Saving money on your mortgage

Want to save money on your mortgages? Why not try to remortgage your property?

Remortgaging is moving your mortgage from one lender to another. It's a great way to exploit the current low rates or to break free from a high variable fixed rate mortgage. If you have owned the property for a couple of years, it might be greater in worth than your outstanding debt. If you remortgage, you can release some of this value as cash.

Remortgaging is a no-nonsense, clear cut process. First thing to do is to talk to a mortgage expert about the availability of various mortgages. Check your savings and do some math. Is the cost of remortgaging lower than your savings? Do you have enough money to go through with it?

Remember that once you severe your ties with your current lender, you are obligated to pay all the charges you still owe. This could totally wipe out your possible savings. Read, compute and analyze before taking your step.

If you decide that switching is worth the risk, you give the go signal to your mortgage lender. Then they will want to know two important facts: how much your property is worth and how much do you earn? After all, they need to make sure that you can pay. Most of the mortgage lenders out there will call for you to have about 10% equity in your home. Equity refers to value you have on the property over and above all the dues you have on it.

You will have to fill out the needed forms and a surveyor will visit your property and estimate its worth. Take note that a surveyor will value your home at a lower price than an estate agent.

Then decide on the kind of deal you'd want to negotiate with: fixed, capped, discounted and flexible.

Fixed-rate transactions are perfect if you want certainty. This way, you'd be able to control how much you'd be spending each month. Rates are often fixed for a period of two to five years.

Discounted loans, on the other hand, propose a decrease on the standard variable rate of a time frame. After this time, your rates will vary according to the interest rates on the market. In this deal, you might be saving money on the initial course of the deal but, if rates inflate, so does your mortgage payments when the discounted period is over.

Capped-rates mean what they say. A limit is set on the rates you pay. If the current rates on the market rise above this "cap", your payments will not necessarily follow. But if rates do fall below the limit, then so does your payments. A good choice since you will be able to regulate how much you'd be putting out yet take advantage of the times when rates are low.

In flexible mortgages, you will be able to overpay and underpay at your leisure, without penalties. If cash flow is rich, you'd be able to pay as much as you want so as to clear your debts quicker. But if the river of money is dry, you can pay only as much as you can. This is the deal for people with fluctuating incomes or those who want to finish their payments early.

Are you considering remortgaging now? By all means, do. Remember to read the fine print before signing everything and be sure to understand all the risks involved. Remortgaging can be your ticket to save more dollars but can also be your downfall if you walk into it blind. Be informed.