Remortgaging: What happens if House prices Fall?

In the UK, the majority of homeowners have benefitted from significant house price rises. For example, the average house price has more than doubled in the past 5 years. (why house prices have increased so much) This means that many homeowners have the option to remortgage and gain greater equity withdrawal. This means they will gain a bigger mortgage against the value of their house price.

However, some are concerned that UK house prices could fall soon. This is because they are overvalued. Why House Prices may fall soon

If house prices fall, it could mean that those who remortgage are more susceptible to negative equity. Negative equity means that the value of the house is worth less than the mortgage. The real concern over this is that if you had to sell the house, you would still owe money on your mortgage. This might be a reason to delay remortgaging. However it is worth considering these factors:

Why House Price Fall is not a Bad Thing

1. If you remortgage your house to 90% of its present value, house prices would have to fall by 10% to create negative equity. Therefore, when remortgaging it is worth leaving a safety net of 5-10% to insulate against the prospect of negative equity.

2. If you have debts on higher interest payments it is better to pay off the debts remortgaging, rather than continue to pay the high interest rates.

3. If house prices do fall it may enable the MPC to reduce interest rates. This is because if house prices fall it will reduce growth and inflationary pressures. Therefore, the MPC will be able to cut interest rates. This will reduce monthly mortgage payments and make it easier to pay back. Falling house prices are only a problem if you have to sell your house. Also, it is worth remembering if house prices do fall, it will be cheaper to buy a new one.

4. The real problem for remortgaging is if interest rates increase significantly. This is because a higher mortgage leads to higher interest payments. If this is a concern you could get a fixed rate remortgage to insure against rising interest rates. - Interest rates will rise if growth and inflation are high.

Overall, the fear of falling house prices is not a reason to avoid remortgaging. Also, it is worth remembering that many house price experts have predicting the imminent collapse of the housing market for the past 5 years.

• Top 10 Tips for Remortgaging
  
• Why House Prices may never Fall
• 
  

Remortgaging

It is often said, that those who give advice, seldom want to follow it. Despite running a mortgage website and writing frequently about the benefits of remortgaging, for some reason, I spent at least 18 months on a SVR with my bank.

The reason is that I investigated remortgaging with many of the high street banks like Halifax, Abbey National and HSBC. Every one said there was no hope of remortgaging because my mortgage debt is 7-8 times my income. However, when I rang up my current mortgage lender Standard Life they agreed to move me to a better deal. As an existing customer I prequalifed to remortgage. The phone call took less than 5 minutes, and my next monthly repayment was £123 cheaper (on £140,000 mortgage) I couldn't believe how easy it was to save so much money.

The only cost of remortgaging was (I think) a £499 set up charge, which I added to the mortgage.

• Top 10 Tips for Remortgaging - recent article
  

Top 10 Cheapest Remortgage Deals UK

Remortgaging is one of the best financial decisions that you can make. If you switch from your lenders Standard Variable Rate, to a more competitive remortgage rate, you have the chance to save hundreds of £s. These are some of the best mortgage dealers who have among the most competitive remortgage deals.

For more advice on remortgaging, including an evaluation of different types of mortgages available see: Remortgaging in UK

Cheap Remortgage Rates

1. Cheap Remortgage deals - reviews of all main mortgage lenders
2. Ocean Finance Mortgage -
3. Abbey National Mortgages - Remortgage deals with Abbey National including 2 years tracker mortgage
4. Halifax Remortgage - Switching your loan from another dealer
5. HSBC - Remortgage
6. Woolwich Remortgages
7. Abbey National Mortgages
   
8. Cheap Remortgage Quotes - from CMS
9. Bad Debt Remortgage - Specializes in bad debt and problem remortgaging
10. Remortgages at British Informations
    

Top Ten Remortgage Sites

1. Guide to Remortgaging
   
2. List of top 10 Remortgaging Firms at e banking.co.uk
3. Top 10 Mortgages - Shops Direct.com
4. First Plus Some of the top Loans for UK Homeowners. Easy online application.
5. Mortgage Warehouse - We work with a wide range of lenders, some you'll know and many you won't. Of course every one of them is FSA authorised. The overall cost for comparison is 5.6% APR
6. Norton Remortgage Get any purpose remortgages at Norton Finance from 25K
7. Central Capital - Free Search, bad credit no problem, compare rates and repayments. Save upto 50% on your mortgage payments
8. Remortgages at APS Mortgage.tv specialise in fast remortgage services, whatever your circumstances APS can help
9. Experts in Remortgaging - no obligation and no upfront fees
10. Remortgage Online at 1 Mortgages. Either remortgage or get new home loan

See also:

• Costs of Remortgaging
• Remortgage for Debt consolidation
• Self Certification Remortgage Quotes
  

Getting a Remortgage Quote with own Lender

Currently I am on Standard Life’s Standard Variable Rate of 6.75% paying £878 per month. The mortgage balance is about 137,000 and is for a term of 32 years.

I have been with the standard life for nearly 3 years. Originally the mortgage was a self-certification mortgage. At the moment I thought it would be hard to re mortgage because my income is too low for conventional mortgage deals.

Despite writing frequently about the benefits of Re mortgaging on this mortgage sites I never got round to doing it myself. – Sometimes it is easier to give advice than it is to follow it!
Anyway today I rang up standard life and asked about Re mortgaging. They offered a couple of deals.

1 Year Discount Re mortgage

• 1st year 1.85% discount off SVR
• 2nd Year 0 discount

This deal is tied for 2 years and has no costs of setting up. It means in effect there is an average discount of 0.925% over the two years. In the first year I would save £157 per month. Therefore total savings – 12 * £157 = £1884. This is an average saving of £942 per year.

3 year Discount Re mortgage

For each year there is a discount off SVR of 1.46%. This means that on current interest rates my mortgage interest payments would fall from £878 to £753.73.

This is a monthly saving of £125 but is for 36 months. Therefore total savings over 3 years is £4,101. However for this deal there is an administration cost of £399. Therefore total savings = £3,702. This is an average of £1,234 per year

After the time periods the mortgage reverts back to the SVR, but you are then free to change mortgage again.

The best thing about this deal is that as an existing customer I don’t need to prove any income – you automatically qualify.

Now why didn’t I do this a couple of years ago?

Top Tips for Remortgaging:

• Remortgaging is the easiest way to save lots of money.
• It is Always worth starting off with your existing mortgage dealer. This can be a good way to save on mortgage fees.

Mortgage Exit Fees are you due a refund

Since the Financial Services Authority FSA recently announced that banks must repay customers who get unfairly charged for bank charges. Customers and the FSA are now turning their attention to mortgage lenders who charge exit fees.

In an increasingly competitive mortgage industry exit fees have been used as a way to increase their slim margins. However as a result exit fees are now much higher than there estimated cost. For example the average exit fee is £200 but the cost is more like £60.

Many mortgage customers may be entitled to a refund. If the mortgage lender charged an exit fee higher than that stated in your original contract. You should write to your bank and ask for the difference to be refunded.

It is thought that over 2 million people who took out a remortgage in the past two years. May be entitled to a refund. This is good news for customers and bad news for mortgage lenders who are facing a potential £190m loss.

see also: cost of remortgaging
see also mortgage exit fees

Top 10 Financial Tips for saving Money

1. Avoid Late Payment Penalties. Don’t be hit by penalties for late payment. Make sure you always pay off at least the minimum on your credit cards. A good tip is to set up a direct debit so that your payment can never get delayed in the post.

2. Arrange Overdrafts First. If you are going to go overdrawn try to arrange an official overdraft or take out an emergency loan. This will save a lot of money in penalty charges. Also it will protect your credit rating.

3. Don’t accept penalty payments. If you do miss a payment by mistake or go slightly overdrawn then the bank might agree to give you the benefit of the doubt. If you have been charged; the first thing to do is to write to the bank or phone and explain there was an unfortunate mix-up, due to getting lost in the post (or some other excuse) the payment was unfortunately late. Quite often the banks will agree to retract the penalty charge and not harm your credit rating. The important thing is that it is always worth trying, banks do actually want to create a good brand image, (even if it might not seem like it all the time)

4. Move Credit Cards to 0% interest. If you have a credit card debt, the standard rate will probably be over 15%. However many credit card companies offer 0% balance transfers for the first 6 or 9 months. This is definitely worth doing. When the 6-month period ends, just move it to another credit card company. Some credit card companies may have a 2% balance transfer charge. However this would still work out at an average annual interest payment of 3% (on a 9 month balance transfer) so is definitely better than staying at 17%.

5. Move Debt to Lowest interest Rate. If you are unable to do the above, at least move your debt to the lowest paying interest account. If you are paying interest on a credit card at over 15% there is probably a much cheaper way of borrowing money. Take out a personal loan, which may be half the cost. If you are a homeowner, consider Remortgaging or taking out a loan secured against the value of the house.

6. Try to limit your debt. Look for manageable ways to reduce unnecessary outgoings. Try to budget your spending so that you don’t spend excessively. It is quite easy to underestimate how much you spend on going out, buying clothes e.t.c. It is worth keeping track of knowing how much you spend. Often when people realise how much they spend on takeaways, clothes e.t.c it is quite a shock and they wish to reduce their spending. Don’t live in denial about your high spending habits.

7. Find Best Deals. Take time to search for the best deal. For things like utility bills you can probably save significant amounts of money by switching to a cheaper deal. Use the Internet to find the best deals available online.

8. Small savings add up. If you pay your bills by direct debit, usually you get a small discount. Also some firms encourage you to switch to paperless bills, e.g. BT give a small saving (25p) for doing this. All these small savings combined can make a big difference.

9. Avoid Impluse Buying. Before buying something ask yourself “Do I really need this”. If you find your shopping can easily get out of hand. Try to ask yourself “how often will I use this?” If you can sincerely say that you will use it / wear it often then it will be a good purchase. However if you already have 88 pair of shoes, you have to be honest with yourself and say maybe the 89th pair isn’t of the highest priority.

11. Don’t have kids… children will cost you an average of £200,000 each during their stay at home, not to mention the endless taxi services. Of course non-economists may say finance isn’t the only important thing in life…

All these things can help you save money, reducing your financial stress and allowing you to enjoy the things that really matter.

Getting Best Remortgage Quotes

Tips for getting best remortgage quotes in UK

Remortgaging can be one of the best financial decisions you can make potentially saving you £1,000s over the course of your mortgage term. However it is important to make sure you get the best type of mortgage to suit your needs. There are an ever increasing number of mortgages on the market, and some have various features which make them more suitable for some people rather than others.

The good news is that if you are seeking to remortgage financial institutions usually offer a much better rate than to their existing customers. It sounds strange but thats the way the UK mortgage market works.

see types of mortgages in UK