Millions of homeowners are facing payment shock in 2008 as their fixed or discounted mortgage deals come to an end. If you are in this position, then it's more important than ever to make sure you get a good deal on a new mortgage rather than just languishing on your current lender’s standard variable rate.
Start looking now
Normally, mortgage brokers recommend people start looking around for a new mortgage deal two to three months in advance – but with lenders currently increasing prices on their mortgages on a weekly basis, the best deals are being snapped up by eager borrowers.
So, if your current deal is due to expire this year, then you should probably start looking for a new mortgage now. Most mortgage offers are valid for between three to six months, so if you do find a good deal then it’s worth grabbing it while you can.
The downside of choosing a new mortgage in advance of your current deal finishing is that, should you change your mind down the line, any fees you have paid upfront for the valuation will be lost.
Whether you are prepared to accept this loss will depend on how keen you are to secure the best rate. Another option is only considering deals that don’t include any upfront costs, although this route will limit your choice.
The easiest way to get a new mortgage deal is by going through a mortgage broker who will search the whole market for you. A broker will also be able to tell you exactly what products are available for you, and keep you up-to-date with rate changes.
However, it is also worth speaking to your current mortgage lender to see if it is prepared to offer you a good deal. Lenders are often keen to retain customers so you may well find the remortgage you are offered is better or as good as others in the market.
Finally, once you know what rates you can get from a mortgage broker and your current lender, it is also worth checking what the high street banks are offering in their branches. At the moment, some lenders have more competitive rates available through their branches than through brokers, so cutting out the middleman could get you a better deal.
Some lenders, such as HSBC, First Direct and Direct Line, don’t offer their products through mortgage brokers so don’t forget to also check what mortgages they have on offer.
Sort out your finances
Even if you are lucky enough to grab a great deal before it is pulled, the chances are you will still see your monthly repayments increase. Despite several Bank of England base rate cuts, mortgage rates have steadily got more expensive as a result of the credit crunch.
Unfortunately there is not much you can do about higher repayments. But by re-organising your finances and cutting back in other areas of your life you could offset the higher costs.
Drawing up a monthly budget is a great way to start saving money. This will help you monitor how much money you have coming in and going out, so that you can work out what you have left for non-essential expenditure.