Over the last few months, more mortgages have been added to the market with incentives which could be financially beneficial – here is a round up of three “perks” you should consider if you are looking to remortgage this year
Mortgage rates seem to be on their way down – but the price isn’t all you should look out for.
Brits have had housing costs at the forefront of their minds over the last 18 months and with millions to see their fixed rate deal come to an end this year this looks set to continue going forward. Remortgaging is when you move onto a new mortgage deal while staying in the same property.
Homeowners usually decide to remortgage when their current deal comes to an end. Technically, remortgaging is when you switch to a new lender, and if you take out a new deal with your existing one it is called a “product transfer”. When looking for a new mortgage, many will simply base their decision on the price and how much they will need to pay monthly.
However, if you are looking to sign up for a new deal this year there are other things you should consider too, according to consumer champions at Which? magazine. Over the last few months, more mortgages have been added to the market with incentives which could be financially beneficial.
Here is a round up of three “mortgage perks” you should consider if you are looking to remortgage this year. Of course, you shouldn’t go for a mortgage purely based on any additional perks – make sure you go for the deal that is right for you.
Cashback
A cashback mortgage is exactly as it sounds, you get money back from your mortgage lender as an incentive to take your mortgage with them – whether you are buying, or remortgaging. Lenders often offer cashback of anywhere from £500 to £2,000 and sometimes you might be offered a set percentage of what you borrow back.
Which? analysis of moneyfactscompare.co.uk data found that 23% of deals for first-time buyers came with cashback, compared to 16% for existing homeowners. Interest rates do tend to be higher on a cashback mortgage when compared to a non-cashback deal – so may need to shop around more to find the best deal.
Alongside this, additional terms do vary from lender to lender however something you should consider when taking on a cashback deal, is that if you leave the deal early you may need to repay some or all of the cashback you receive. However, if you find a cashback deal at a deal which suits you and you don’t plan on moving or remortgaging during the term then there are very few downsides to accepting a cash boost.
Free valuation
A free valuation incentive is offered on a majority of fixed rate mortgages in the market with around 75% of mortgages having this as an incentive – but some still don’t. Before offering you the mortgage, the lender will conduct the valuation to check if it is happy to lend on it. This could involve a surveyor visiting your home, sometimes they conduct a “drive by” valuation, and it could be a simple desktop valuation. The valuation will be the figure that will be used by the lender to calculate the loan to value (LTV) of your deal.
If this is not included in your deal, a mortgage valuation can potentially set you back a few hundred – potentially thousands of pounds. The cost of a valuation will depend on the size of the property, but typically starts from around £250, rising to about £2,500 or more depending on the initial value of your home.
Refunding legal fees
Legal work is required when you are remortgaging – mainly when you need to remove the original lender and add a new one to your property. Sometimes, lenders offer refunds on conveyancing fees as part of their mortgage deals. Which? says around 45% of mortgages include free or refunded legal fees however, these offers are usually more common on remortgages.
The only downside to this is that the lender will select the solicitor, so the Money Saving Expert website says you shouldn’t expect “a high-speed service.” The conveyancing fee normally costs around £350, and usually, your new lender will cover the cost. If you have to pay this fee yourself, you’ll have to pay it upfront. So once again, the saving is a relatively small one compared to other housing costs – but it is still a saving all the same.
