Understanding Remortgage Rates

Once you have taken the difficult decision to remortgage your home, you need to shop around to find a product that suits your needs. A wide range of remortgage deals are currently available, and understanding the differences between all the different products can be tricky for the average homeowner. This guide can help you to understand remortgage rates and find the home refinancing product that is right for you and your family.

Fixed Rates

A fixed-rate mortgage has an interest rate that is fixed for a specified period of time, usually two, five, or ten years. This type of mortgage can turn out to be highly beneficial if the bank’s interest rate rises after you remortgage your home, but it can also lead to you missing out on falling interest rates. One advantage of fixed-rate mortgages is that they bring certainty, as you know exactly what you will be paying each month during the fixed-rate period.

Remember that once the fixed interest rate period ends, the rate of interest you pay could change dramatically. If the deal is no longer acceptable to you after this change, then you could remortgage again to take advantage of the best deals on the market at the time.

Tracker Rates

The interest rates charged on tracker mortgages follow the Bank of England’s base rate. As the base rate goes up and down, the amount you pay will fluctuate accordingly. You may benefit from decreases in the interest rate, but you could also suffer financially if the rate rises. However, you have the security of knowing that the lender can not increase your payments more than the national interest rate set by the Bank of England.

Variable Rates

With a variable mortgage, the lender is free to increase or decrease the interest rate. You might be offered a low rate initially, but this could increase quickly so that you are paying much more than you first expected. When using a variable remortgage deal, read the terms and conditions carefully so you understand how much the interest rate can be increased, and how soon after taking out the mortgage you can expect the rate to be changed.

Capped Rates

Capped mortgage rates fluctuate like those of a variable mortgage, but you are given a guarantee that the payments will not exceed a certain level. This type of remortgage gives you the peace of mind of knowing what the ‘worst case scenario’ can be.

Discount Rates

In order to attract borrowers to their products, some lenders offer discount remortgage deals. With this type of mortgage, you would be given a fixed percentage discount on the interest rate usually charged by the lender. Be warned that this discount will usually only last for a pre-defined period, such as two or three years.

Deals that offer attractive rates for a short period of time can be very useful for people who are looking to remortgage their homes. If you have already paid off much of the balance of your mortgage, then transferring the remaining portion to an attractive remortgage deal could be a sensible financial decision; the right deal could allow you to finish repaying your mortgage before the initial offer period ends and therefore save money on interest payments.

Flexible Remortgages

If you are remortgaging your home with a plan to pay it off early, or if you want to take a break from expensive payments to get your finances back on track, then a flexible mortgage could be what you need. These mortgages usually have variable interest rates that are calculated on a daily basis, but their key feature is that they allow the borrower to overpay or underpay according to their financial circumstances. If you want to avoid early repayment fees or need to take a payment holiday, a flexible remortgage could be the right option for you.

Understanding Remortgage Deals

Lenders offer a wide range of deals which you can use to remortgage your property. It is a good idea to compare many deals before you make your decision, but you must also ensure that you understand the terms and conditions on offer. Consider seeking independent mortgage advice to help you understand remortgage rates and find the product that best meets your needs.

Sam, the author, has been using price comparison website, uSwitch to get a better understanding of remortgage rates.