Buying a home is a dream come true for home buyers. The stress of shopping, the process of securing a mortgage, and then actually taking possession of the property can be filled with ups and downs. For first time buyers, it is usually a leap into the unknown as many have little knowledge of all that will be required and the steps that are taken to buy a property. Once ownership is secured with a mortgage, the new homeowners get on with living and take little notice at what is occurring with the loan they first obtained.

Many studies on homeownership and financing have revealed that few know anything about remortgaging. Even fewer are aware of the impact a higher or lower interest rate has on their financial health and budget.  Many could be missing out on thousands per year that could be saved.

The interest rate is basically the cost of borrowing. The homeowner borrows a set amount of money and the cost of borrowing that amount is determined by the interest rate. This is why the interest rate is such a focus. The interest rate will not determine how long the homeowner will pay on the mortgage. It only determines how much they will pay to have borrowed the money for purchasing their home.

By securing a lower interest rate savings could be found. Substantial savings in some situations. 

When a homeowner secures a mortgage, it is attached to a specific kind of interest rate. It could be flexible or fixed. A fixed rate means the interest rate will be fixed and not change for the life of the mortgage or as it is called, the term of the mortgage, such as a two year fixed rate mortgage. The flexible rate adjusts in line with the Bank of England’s basic standard rate or other determined level. Therefore, if the Bank’s rate goes up or down, so will the homeowner’s mortgage rate.

Just a small part of a percentage of interest on a loan at the borrowed level of most mortgages can amount to hundreds or thousands extra paid out or saved.

When a term is finished on a homeowner’s mortgage they can remortgage and get a new deal. 

At that time, rates could be much lower than they were before, such is the case for homeowners that mortgaged two years ago and are facing the pandemic impacted low interest rates offered currently. Securing a longer term when rates are low is a common strategy, but if rates are higher it could be better to get a short term and hope for lower rates later when the term ends.

If the homeowner does not remortgage, they are moved to the lender’s standard variable rate (SVR), which is considered risky for those that cannot take quick fluctuations to their budget. The SVR can be increased at will by the lender with little advance notice. It could cost more than desired by the homeowner and force them to rush to remortgage and all the while be paying out more than necessary. Currently paying on a SVR could amount to being with an interest rate almost double or more than what is available with a remortgage.

Since a remortgage is so important in making smart financial choices as a homeowner, the time to start considering a remortgage is long before it is needed. Shopping online periodically can give a homeowner ideas as to how the lending market is performing and what savings are available. Then when it is time to take action, the homeowner is more than ready to take advantages of savings and remortgage when it’s time to do so.