The Lowest Interest Rate Remortgage Might Not Be the Best

The Lowest Interest Rate Remortgage Might Not Be the Best

When a homeowner’s mortgage term is about to end they have to make a choice as they once did when they acquired the loan. The term ending brings about the opportunity to again choose a deal. They may remortgage and choose from the many products available from brokers or lenders, or they may choose to not remortgage and be moved to their lender’s standard variable rate or SVR. The choice to remortgage or to not remortgage has its own advantages, and experts agree that now with interest rates so low, remortgaging could be the very best choice.

An SVR can be risky for a homeowner. It can fluctuate up and down with little notice and is not the best choice for those that are not prepared to have such uncertainty impacting their household budget.

A remortgage could offer more stability with a known and fixed repayment according to the chosen interest rate. A fixed rate remortgage is exactly as it appears, it is a deal with an interest rate that is fixed for the term chosen, whether that be one or more years. It does not have a fluctuating interest rate, though there again, there could be reasons why someone would choose a fluctuating rate.

Choosing a fixed rate when interest rates are low and expected to rise is considered a sound financial choice. Especially now when the Bank of England’s standard base rate is at an over 300 year old low choosing a low fixed rate remortgage is popular. Never in the history of the Bank has the rate been lower. The opportunity amounts to very cheap borrowing.

In choosing a remortgage, it would make sense that to save the most money one should shop for the lowest interest rate available, but that could be a mistake. The lowest interest rates often have the highest fees associated with them. There could be other costs as well, as some deals will have free services attached while others will not. 

A homeowner should consider all costs involved in a remortgage and balance that against any savings, then the true worth of the deal as an overall savings can be determined.

It could be the lowest interest rate is not the one with the greater savings. It could be the deal with the slightly higher interest rate and free incentives attached, as well as a lower fee. 

Homeowners are encouraged to shop around online with brokers, who work with many lenders, or shop online with a preferred lender. By shopping online, a homeowner can gather quotes to compare and determine the best overall savings a particular remortgage could offer.

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