My Financial Tips

Refinancing your mortgage loan can save money and make your budget more manageable. There are disadvantages and risks associated with refinancing your mortgage; the main disadvantage is that you are back to square one with your loan amortization.

This means your payment will primarily go to interest and you will build very little equity in your home.

The mortgage disaster has just begun. There may have been thousands of homes throughout the country that would not have been built if not for risky lending practices. An unrealistic supply curve has caused the price of homes to fall dramatically. The result is a devalued real estate market financed by middle America: the group who will realize the greatest losses.

It may be that thousands of people are entitled to a refund from their mortgage lender, or some type of loan adjustment.

Many mortgage holders are finding their current mortgage deals coming to an end and are thinking about moving to a new mortgage to save outgoings.

Well it looks that if you can reduce your monthly mortgage costs by 0.5% then you could be saving yourself a lot of monthly expense. This could be a saving that you can spend elsewhere or if you are unlucky and expecting a huge rise in mortgage costs, just a reduction in the increase of the monthly cost.

Using mortgage comparison tables tell you what mortgage is the cheapest on the market right now, but is it right for you? More importantly, will it actually reduce your expenditure in the long term?

Although interest rates have crashed at the moment and are expected to stay low for some months, some experts believe a reduction is on the cards in the short term. So if you lock into a 2-year, 3-year or longer fixed mortgage rate, by the end of the term you might be paying more than a variable mortgage if you had stuck it out.

On the other hand, we could be surprised by a recovery and interest rate rises and then you would be in pocket. That’s the nature of this game. But this isn’t the only area in which you could be spending a lot more than you need to.

Look carefully at those best remortgage offers that you see in mortgage charts and read the small print. Look for the upfront fees – arrangement fees, legal fees etc. Take a look at your existing mortgage, how much is involved in closing that? There may be exit and deed release fees. These fees may also exist in the new mortgage – are they significantly higher than the current mortgage – that’s equivalent to a cost in the future?

When you look at these fees, how much will you be paying to switch your mortgage? Many building societies allow you to add this to the borrowing, but then you are paying extra interest on them for the life of the mortgage. Even more outgoings each month!

If you are able to pay these fees at the time of the move then in the long term that way is going to be more cost effective. But then look at your existing mortgage. If you are having to pay ?2,000, maybe even more to swap mortgages, could you instead pay off a small chunk of the mortgage, or at least put that cash away in a high interest account instead? Then take a look at how that would offset your payments – or work out what your net payments are after the money put aside earns some interest.

Changing to a new building society may not always be the right thing to do. First, speak to your building society and see what monthly charges they can get you down to with your existing mortgage. Then, instead of relying on tables to compare the best mortgage rates, speak to a few mortgage brokers and get them to do all of the leg work for you and write down exactly what you will be left paying each month.

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