The Many Types Of Remortgage You Have To Choose From

Getting the wrong remortgage can be costly. You could end up tied into an expensive mortgage deal for a number of years with sizeable early repayment charges for ending your promotional rate early. So, before you make what is one of the most important financial decisions, read our guide to the different types of remortgage that are available.

Types of Mortgage Products: There are a wide range of different kinds of mortgages on the market, and depending on the one that you choose, it will either suit your current financial circumstances or not, so it is best to be aware of the various different policies on offer.

Fixed Rate Remortgages: A fixed rate home loan does exactly as the title suggests. The rate of interest is set for several years; the maximum length of time is normally 10 years. You will normally be able to choose from a range of fixed rates of 2 years, 3 years, 5 years and 10 years. Fixed rate mortgages normally carry with them larger arrangement fees to be paid up front. The bank or building society will normally fix the rate at a certain level above the regular standard variable rate (SVR) when the product is launched, it might be tempting to go for the cheaper variable rate, but as the name suggests, the rate is variable both downwards and upwards.

Bear in mind that when choosing a fixed rate mortgage, interest rates are generally higher on longer term fixed rate deals than they are on short term fixed rates. This is because the lender has to hedge against any significant increases in interest rates during the period of the fixed rate deal. Once your fixed rate ends, your mortgage will normally revert to the lender's standard variable rate.

Fixed Rate: With a fixed rate mortgage, the interest rate is fixed at a set rate for a set period of time. The fixed rate period can be anything from 2 to 10 years. These types of mortgage commonly have higher fees involved for the privilege of hedging your bets against interest rate increases, and these fees are usually paid by way of a larger arrangement fee.

You will often find that, as with fixed rate, arrangement or booking fees apply to these deals. Always make sure that you take any arrangement fee into account when considering a discounted remortgage and, if you're not sure whether it is the right thing for you, you could consult an independent mortgage broker.

Capped Remortgage: This is a mortgage type that many people are unfamiliar with. The capped mortgage deal is a product where the rate of interest is capped so it can't go higher, even if the base rate of interest does. Similar to the fixed and discounted mortgages packages, you are buying a guarantee and that is the expensive part of the product, the fees for this are expensive and normally paid in advance.

Offset Remortgage: The idea of offset remortgages can be intimidating to some, but in general they aren't as complex as they sound. In simple terms, the offset mortgage is a loan where your savings are connected to the mortgage. The savings that you have accumulated are then utilised to make extra instalments to pay off your mortgage quicker.

Offset mortgages can help you repay your mortgage more quickly; indeed many people cut the term of their mortgage by a number of years simply by using an offset facility. They are more flexible than traditional mortgages and can help you pay back your home loan faster.

There is, therefore, a lot of choice. The most important thing is to make sure that you always find out as much as you can about the market and your options before making any decision that can affect your future.