by Mark Johnston
A mortgage renewal is a statement that is sent out by a lender to its customers at least 21 days before the end of their particular mortgage deal, be that a fixed, discounted or tracker.
This statement usually contains information about the balance remaining on the mortgage and also it current interest rate.
If a borrower does nothing with information then in general the interest rate on their current mortgage with automatically revert to the lenders standard variable rate (SVR).
According to Moneysupermarket, a popular comparison website, 72 per cent of people simply sign their mortgage renewal forms with out even looking at the new terms and conditions.
With the mortgage rate war still in full force at the moment sticking with a lenders standard variable rate may not be the best option.
Therefore a mortgage renewal can mean borrowers could benefit by switching their deal to one with a better more favourable interest rate. Getting the right deal can save consumers £100s.
Figures show that shaving just 1 per cent off a £100,000 mortgage would reduce mortgage costs by around £80 a month.
A mortgage renewal can also potentially allow home owners to raise additional capital.
So if a borrower does plan to stay with their current lender they should not be afraid to ask for a better deal as some lenders will work with their existing customers in order to keep their business.
Negotiating with the current lender may not just be about a better interest rate, it could also mean negotiation on different mortgage terms.
Data from mortgage industry experts has revealed that the average amount of time borrowers ‘shaved’ off their mortgage term when renewing was around 7.4 years.
This all said, some experts have suggested that loyalty to one lender does not necessarily pay when it comes to mortgage renewals and a recent survey agreed with this by adding that it found that loyal bank customers do not get the best deals when they renew their mortgages, it is people who switch that get the best deal.
Though, many consumers still believe that the more services they have with one lender, the better deal they will get on their products, but according to economists this is not the case. It is the consumers who switch lenders that generally get a better deal as new customers offer lenders an opportunity to sell more products.
Also borrowers should note their own bank or building society can only offer products from their own range.
Therefore it could be a good idea to employ the services of a professional mortgage broker, especially as most brokers have access to the best ‘renewing a mortgage’ deals which are not easily available to the general public.
Although, it is wise for borrowers to at least do some of their own research in to what deals are currently available before they employ a mortgage broker so that they know if what a particular broker is offering is a good deal or not.
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