If
you're remortgaging to get a lower rate of interest
and so save money, you might be tempted to increase your mortgage
term.
This could cut your monthly costs significantly.
Let's assume you were offered a repayment
mortgage (also known as a capital
and interest mortgage) of £100,000 at an interest rate
of 6 per cent
If you had 20 years still to go
on your old mortgage
term, you might choose this as your
new term. This would mean you'd repay around £716
a month or a total of just under £172,000.
But if you increased your term to 25 years,
your repayment would fall to just £644 a
month - and that might seem like a very good
deal indeed.
But it would be a false economy.
This is because if you multiply £644 by 12 payments
a year over 25 years, you get a total cost of almost £193,400
- meaning £21,400 more of your hard-earned cash has
ended up in your mortgage
lender's pocket.
So if you can possibly afford it, take your new loan
over the same term as remained on your old one.
Or better still, cut it even further – it will increase
your short-term costs, but the long-term savings will be well
worth it.
If
you want to get your best remortgage
quote quickly and easily we offer a great
new service. We can put you in contact with a professional
mortgage adviser. It's free and completely confidential. Simply
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