The easiest way to lower your mortgage repayments each month is to switch over to a new mortgage deal. This process is known as refinancing your mortgage. Essentially all it means is that you move your existing mortgage loan from one deal onto a new deal which may or may no be with the same mortgage lender.
Why refinance you mortgage?
The main and obvious reason to refinance you mortgage is to reduce the amount of interest you are paying each month. Recent cuts in interest rates have meant that many borrowers that have fixed mortgages are now paying a much higher rate of mortgage than they would if they were to take out a new loan today.
In addition to recent cuts in interest rates, many borrowers find their monthly repayments have risen sharply after their discounted or teaser interest rate period has expired. Once their repayments move to post teaser rates many borrowers suddenly find themselves unable to meet their repayments or having to cut their expenditure elsewhere.
What if I have bad credit?
Refinancing is usually a great way to reduce your mortgage repayments, but is it possible if you have a poor credit score? It is a fact that if you have a bad credit score you will end up paying more interest than a borrower with a great credit score however you should still be able to refinance.
There are numerous specialist lenders out there that specialize in supplying mortgages or refinance to borrowers with poor credit scores. Approaching one of these lenders is the best plan for someone looking to refinance who may have a poor credit rating.
Mortgage advisers are divided in their opinions as to who are the real winners and losers out of the recent interest rate rises.
No one could argue that borrowers who have variable rate mortgages have lost out because their monthly repayments have increased due to the extra interest due.
However there is debate over whether borrowers of fixed rate mortgage products are better or worse of than before the recent base rate rises.
The interest rates set on fixed rate mortgage products are not necessarily tied to the Bank of England Base Rate. Rather, they are derived from the cost of borrowing to the lender, which is called the swap rate.
While the base rate has risen over the past year, so have swap rates. This should result in an increase in the interest rates offered by lenders on fixed rate mortgages. In other words, lenders would pass on the increasing borrowing costs they are forced to endure to their borrowers.
However, this has not strictly been the case. Many lenders have not passed the increased swap rates on to their borrowers and have instead reduced their margins.
Some mortgage advisers are claiming that by not passing on the full amount of the increase in swap rates, the borrowers are gaining a huge benefit.
Other mortgage advisers, however, are quick to point out that although the interest rates offered on fixed mortgages haven't risen in line with the increase in swap rates, they have risen, and borrowers are worse off as a result.
Whatever their individual opinions, mortgage advisers have been busy helping their clients save money by remortgaging to more favourable products as interest rates increase.
This flurry of activity has meant that mortgage advisers may be the real winners as they receive commissions and fees from mortgage lenders for each remortgage they complete for their clients.
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