Despite, or maybe even because of, the woeful state of the economy short term interest rates are still at record low levels. Whilst term funding rates have firmed over the past year there are still some good value loans and mortgage deals to be had by those looking to restructure their finances.
Getting mortgage finance is nowhere near as easy as it was a few years ago before the financial markets melted down spectacularly. The number of providers is greatly reduced as has the variety of plans available.
But for those with a good credit history it is still possible to consider refinancing the home to take advantage of the lower rate deals that are in the market currently. And with interest rates set to increase over the coming months and years to try and calm inflation, it could be a good time to consider a long term fixed rate deal to manage costs.
Lenders have tightened up their terms considerably in recent years. That means that only the best quality customers have access to the most attractively priced deals. `Best quality` revolves around a number of factors including credit history (an unblemished payment history is a must) and the level of deposit or equity available in the property being financed. Having been caught out by a drop in property values and hence security cover, lenders are now looking for at least 20% deposit or equity before the best rates become applicable.
But if you are one of the long term homeowners that has benefited from property value increases over the years then it could be possible to tap into the source of capital and release some cash to pay off other debts or finance some other project or dream.
Even those with a less than perfect credit history can look at equity release if they have a significant equity stake in their own home. Borrowing on a secured mortgage can be one of the most cost effective ways to borrow and the long term nature of the loan means that inflation helps make the cost reduce in real terms over the coming years.
In addition to the headline rates of interest charged many lenders will also levy a range of fees. These can include a property valuation survey as well as a administration or commitment fee of anything up to £1,000. Therefore, refinancing is not a decision to be taken lightly but should be considered as a part of a total debt management plan.
When considering what type of mortgage is best there are a number of factors to consider. Whilst fixed rate deals provide a hedge against increasing borrowing costs should those market rates fall there will be no benefit received. Also, should you wish to sell the property and move home during the fixed rate period, there may be significant additional redemption fees to be paid.
So weighing up the options is a valuable part of the process. Having a clear picture of future needs and likely housing requirements should also be factored in before looking at the various options with the help of a mortgage cost calculator.
