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Mortgage Switching?
Is it worth remortgaging
from one scheme to another? What should the total switching costs be?
A remortgage is when you transfer your current mortgage to a
different policy, even if it's with the same lender, and you arent
moving house. However, you might be charged a redemption fee from your
existing lender: the new lender might well charge fees too, and there may
be legal & stamp duty costs. All your costs, legal, administration
and valuation to name but a few are called switching costs.
The only really viable reason for remortgaging is if the switching
costs are low enough, basically the new mortgage deal has to be cheaper
than the old mortgage package, including all the switching costs. Since
switching cost differ greatly depending on mortgage lenders, this applet
however calculates the Net Present Value or NPV of any improved cash
flows resulting from the switch.
This program represents the cash flow as a single lump sum for the
new mortgage details, if the result is a negative value, then it would
only be worthwhile if there is a cashback deal in the remortgage.
Enter figure from your current scheme and also the terms of your new
scheme. The NPV is shown in red. Compare this figure with the total anticipated
switch costs in order to see if the switch is worthwhile. Note there
is a difference between a repayment and an interest-only mortgage.
Current Scheme
New Scheme
NOTE: for this calculation it is assumed
interest is calculated annualy. Individual lenders may calculate interest
monthly/daily for individual products
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