The Many Types Of Remortgage You Have To Choose From

Deciding to take out a remortgage is perhaps one of the biggest financial decisions anyone can make. The consequences of getting the wrong mortgage product could be that you are tied to an expensive contract for a long time. In this useful information guide we explore the different kinds of remortgage products available.

Types of Mortgage Products: There are a wide range of different kinds of mortgages on the market, and depending on the one that you choose, it will either suit your current financial circumstances or not, so it is best to be aware of the various different policies on offer.

Fixed Rate Remortgages: A fixed rate mortgage will guarantee the interest rate that you pay for a certain period of time. Fixed rate deals are normally available for up to ten years and 2 year, 3 year and 5 year fixed rates are the most common. Many fixed rates come with an arrangement fee and you will often find that a fixed rate will be slightly higher than a lender's standard variable rate (SVR), depending on prevailing interest rates.

Bear in mind that when choosing a fixed rate mortgage, interest rates are generally higher on longer term fixed rate deals than they are on short term fixed rates. This is because the lender has to hedge against any significant increases in interest rates during the period of the fixed rate deal. Once your fixed rate ends, your mortgage will normally revert to the lender's standard variable rate.

Discounted Remortgage: A discounted remortgage policy is one where the interest rate closely follows the SVR as it fluctuates, but does it at a reduced rate. For example, you might see a mortgage that is SVR-0.5%, which indicates it would be half a per cent lower than the normal standard variable rate given time period, normally between 2-5 years. After this has expired it will revert to the SVR.

A word of caution however. You will need to watch out for hefty fees that added at the start of the mortgage deal. You need to calculate whether or not these discounted rates really are more cost effective when taking fees into account. If you're uncertain it pays to consult an expert such as a mortgage broker.

Capped Remortgage: This is a mortgage type that many people are unfamiliar with. The capped mortgage deal is a product where the rate of interest is capped so it can't go higher, even if the base rate of interest does. Similar to the fixed and discounted mortgages packages, you are buying a guarantee and that is the expensive part of the product, the fees for this are expensive and normally paid in advance.

Offset Remortgage: The idea of offset remortgages can be intimidating to some, but in general they aren't as complex as they sound. In simple terms, the offset mortgage is a loan where your savings are connected to the mortgage. The savings that you have accumulated are then utilised to make extra instalments to pay off your mortgage quicker.

Offset mortgages are an excellent way to clear your mortgage balance more quickly when compared to traditional mortgage products. By linking savings to your mortgage you may be able to pay back your home loan several years earlier than you expected.

When you come to remortgage, make sure that you do the proper research and that you identify all the different types of mortgage deal that may be suitable for you. A mortgage is a big commitment so do your homework before you sign up for a remortgage deal.


------

Timothy Frodsham writes for JustRemortgages.com one of the UK's
top sites for the latest remortgage rates and best remortgage deals.