Mortgages

Through the 1990’s and up to 2007, the ‘known’ mortgage strategy for most people was to take a 2 year deal (because they were the cheapest) and in 2 years, swap over to another 2 year deal.

That strategy can still work, but the world has changed and the ‘2 year’ strategy relies on ‘things going well’. In this market, it’s also good to have an eye on ‘what if things don’t go well’ and consider the long term implications of your new mortgage – what if remortgages are unavailable in 2 years? Could be any number of reasons – house price change, change of job, lenders restrictions etc.

So, what does this mean for you.

As your adviser, I will look out for the best deal for you, but when I run the league table, I will also be looking out for the best ‘follow on rate’ – the rate you go to at the end of your special deal. I will also factor the product fees into this equation as well, some are obviously ridiculous, but I can calculate exactly, which are worth paying and which aren’t.

If you are remortgaging, or considering it, you will also want to consider ‘doing nothing’ – this can be a good strategy and with a number of lenders having very good follow on rates, it’s on the list as an advice option.

Borrowing extra money

If you have a mortgage and you want to borrow some more – to pay off credit, or pay for an extension or any other reason, the usual strategy was to remortgage.

This may not be the best idea in the current world.

Here’s why.

Again, it’s to do with follow on rates – the rate you end up on if you do nothing with your existing mortgage. Many mortgages taken out in 2003 – 2007 have awesome tracker rates after the deal has finished. Some are mindbogglingly good.

So, quite often it’s worth keeping your existing mortgage, but what if need extra money and your lender won’t play ball? Most people would remortgage, but there is a second option.

You can take a second charge. A second charge is a second mortgage with a different company. Usually second charges are at quite poor interest rates,  but it’s easy to calculate if this plan or another plan saves you more money.