- Current mortgage best buys
Millions of people may be considering remortgaging their homes as a result of the latest interest rate rise.
A recent survey found that 14 per cent of households would want to refinance if their monthly repayments rose by �50, almost 40 per cent would remortgage if repayments increased by �100 and more than half would look for a better deal if repayments went up by �150.
They will join the millions who have already renegotiated the loan on their biggest asset for reasons ranging from debt consolidation to improving their lifestyle on the back of house price rises.
A typical two-year fixed rate mortgage taken out in August 2005 was 4.68 per cent, against a standard rate of 6.6 per cent. The comparable two-year fixed rate today is 5.71 per cent, against a standard rate of 7.17 per cent*.
Remortgaging - whether with a new lender or by negotiating with your current lender - is a comparatively simply process in the UK, providing that you have sufficient equity in your home. But it isn't all plain sailing.
Your credit status
If you have a healthy credit rating, you should have a choice of good deals.
But very few people know how a credit rating is calculated and only five per cent of us have ever seen our credit report.
This is the history of your borrowings, repayments and other relevant information, which lenders see when they decide whether to make you an offer and what terms to set.
It is crucial that your credit report is up to date and accurately reflects your circumstances, so you should check it before you even think about applying for a new mortgage. One error or oversight could increase your interest rate offer from a lender - and hundreds of pounds - to your repayments.
Benefits for new customers
Most of the best deals are targeted at new customers, which is what you will be if you shift from one lender to another.
But you may have to pay redemption penalties when you terminate the arrangement with your existing lender, plus an arrangement fee to the new lender, who will also want a survey of your home - and that usually has to be paid for too. The process of moving your mortgage can easily cost more than �1,000, which can take a long time to recoup.
Finding the right deal
It's easy to research the right deal - resources include financial magazines, newspaper sections, web sites and mortgage brokers.
But whenever you ask lenders for further information you must make it clear that you are not making a full application.
Tell them to make only a quotation search of your credit report or you could end up with multiple application searches recorded on it that affect your credit rating. Other lenders are suspicious of this - they can think that you are desperate for money or even that a fraud is being planned.
That means you won't get the offers you need, so it's important to check your credit report regularly to make sure no-one has misinterpreted your requests.
Interest rate
You are likely to get a better interest rate on a mortgage than you are paying on borrowings such as credit cards so you may want to consolidate other debts into your mortgage.
But you are putting your home at risk if you can't meet the repayments - and remember that while monthly repayments are lower, this is partly because you may be paying off the credit card debt only slowly; typically for the next 15 years.
Repayments
Your monthly repayments should fall if you manage to find a good deal for a new fixed rate instead of paying standard rates when your existing fixed term expires.
But the new loan is likely to last longer than the original mortgage, so interest repayments over the life of the mortgage may mean that you end up paying more in total.
Equity release
Remortgaging can improve your lifestyle or, increasingly often, release enough cash to help other family members onto the housing ladder.
But you need to budget to cover the extra debt. You may be near paying off your current mortgage but a remortgage could mean that you're still paying the money back when you've retired. You need to know in advance how you would cope.
If, after considering all of these things, you are still planning to remortgage, your first step should be to check your credit report.
To view your personal credit information that lenders are currently basing their credit decisions on, apply now for a free online credit report. Click here for a free 30-day trial and a free copy of your Experian credit report
