Interest Rate Blindness can Lead to the Wrong Remortgage
When a homeowner is looking for a remortgage they do so for many different reasons but there is usually one thing that all homeowners want from a remortgage and that is the lowest interest rate possible. After all, the interest rate is going to determine the cost of the borrowing so every homeowner wants a cheap rate. However, seeing only the interest rate level of a remortgage can lead to “interest rate blindness” in which the only criteria for a remortgage by the homeowner is a cheap interest rate and that can lead to the wrong remortgage deal.
Homeowners need to take into account why they need the remortgage and that will help them take into account more than just the interest rate to determine the best remortgage deal. Lenders offer a variety of remortgage products to help supply the right remortgage deal for a homeowner’s needs. Homeowners should take advantage of the benefits these different products can offer.
Not all remortgages are created equally. Some remortgages have fixed rates while others are trackers or interest only. Some remortgages have a short term offering before the deal expires while others are long term. If a homeowner expects their financial position to remain steady they would want to pick a long term deal while those that expect financial changes that would offer them the ability to pay more in the near future would want a shorter term. Some homeowners want the ability to pay overpayments and in that case their remortgage deal would need to include the possibility of overpayments. These are all things that deserve attention and would be priorities to some homeowners above just a cheap remortgage interest rate.
Homeowners should also beware of cheap interest rate remortgages that involve high fees. To offset the deep discount in an interest rate offering some lenders make up for it by charging high fees within the remortgage offering. This is another reason that a homeowner should look beyond a cheap remortgage interest rate. By only choosing a cheap remortgage interest rate a homeowner could actually be coming out with an expensive deal due to the attached fees and costs of remortgaging. All costs should be considered in a remortgage to determine if the deal is a good one or if the deal is financially unsound for the homeowner.
Some remortgages will have incentives attached to them if the homeowner chooses to remortgage for that deal such as free valuations or legal work. These too can be considered as a benefit to the remortgage and if it is important can have a bearing on whether the remortgage deal is the right one.
Interest rate levels are important but a homeowner should take the interest rate offering of a remortgage deal into consideration as a whole with all other parts of the remortgage. If a fixed rate is important over a tracker and the interest rate is a bit more for the fixed rate remortgage then the fixed rate remortgage is the right choice for that homeowner. The right remortgage deal involves choosing the deal for much more than the interest rate alone.