Why You Need A Fixed Rate Remortgage

vlad621 | Mar 30, 2010 |

1 Comments | Rating: 0

The most important thing to keep in mind if you are thinking about remortgaging your home is that it is essential that you get a fixed rate remortgage . It might be tempting to consider the low interest rates of a variable rate remortgage but this is a mistake. At some point interest rates are going to go up, when that happens you will wish you had locked in a fixed rate. Always remember that it is really only worth it to remortgage if you can lock in fixed rate that is less than you were previously paying.

The primary reason that most people have for remortgaging their homes is to save money. They do this by getting a lower interest rate, this not only saves money over the length of the loan it will reduce your monthly payment. However unless you are able to lock that rate in with a fixed rate remortgage you are going to end up paying more when rates rise. A remortgage deal isn't cheap there are some pretty hefty fees involved, it really only makes sense to remortgage if you can ensure that you will get a lower interest rate for several years. Otherwise the savings in interest won't be enough to cover the fees.

The fees involved are also the reason that it is generally not a good idea to remortgage your home if you only have a short time left until your mortgage is paid off. Unless you can get a few years of lower interest rates with a fixed rate remortgage it is usually not worth it to remortgage. Early repayment penalties and legal fees can be quite expensive, it will take a few years to recoup these expenses.

The other side of the coin is people who still have a lot of years left on their mortgage, for them it is almost always a good idea to remortgage if they can get a lower interest rate. Many people don't take advantage of the option to remortgage because they don't believe that interest rates have fallen enough to make it worthwhile. This usually isn't the case, over a long enough period of time even a small reduction in interest rates can result in huge savings.

A lot of people with variable rate mortgages also fail to take advantage of the option to remortgage. This is often because as interest rates decline so does their rate, so they often see no advantage to a remortgage, this is especially true when they realize that a fixed rate remortgage will have a higher interest rate than they are currently paying. This is rather short sighted, interest rates will go up at some point and when they do you will wish you had locked in a low fixed rate remortgage.