IS IT TIME TO REMORTGAGE WHILST RATES ARE STILL LOW?

With the monthly mortgage payment representing a major chunk of the average family budget, it can make sense to shop around from time to time to see if there’s a better, more cost-efficient mortgage deal available to you. According to the Council of Mortgage Lenders (1), around 36,000 people remortgaged in November alone, up 13% on the year before. In some cases, homeowners can save hundreds of pounds a year by moving to a more attractive rate with a different lender. Remortgaging can work if your property has increased in value and you want to free up some cash from the equity tied up in your home, or if you want to make higher repayments to shorten your mortgage term. Remortgaging can also be arranged to finance home improvements, to fund the purchase of an investment property or to buy out a joint owners’ share of a property. If you’re currently nearing the end of your existing deal, then this could be a good time to remortgage. Interest rates are currently at an all-time low, and lenders are continuing to offer competitive deals.

WHY REMORTGAGING CAN MAKE SENSE

When your fixed-rate deal ends, your lender will automatically move your mortgage on to their Standard Variable Rate (SVR), which as the name suggests can rise and fall. This SVR rate is likely to be less attractive than the rate you were previously on, and can be increased at any time, irrespective of what happens to the Bank of England’s base rate, which is currently 0.25%. So, shopping around before your deal ends could save you money.

PUTTING THE CASH TO GOOD USE

Research from TSB2 shows that by remortgaging to a lower fixed rate, homeowners can free up cash for a variety of other uses. Over a third (37%) planned to use the extra money to overpay their mortgage, helping them to become mortgage-free faster, while 30% intended to use the cash to carry out major renovation projects like a loft conversion or an extension. Whilst remortgaging might not be right for everyone, it’s well worth investigating what alternative deals might be available to you, especially if you made saving money one of your new year resolutions. As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.

1 Council of Mortgage Lenders, Jan 2017

2 TSB, Jan 2017

INTEREST-ONLY MORTGAGE MATURITIES FUEL EQUITY RELEASE BOOM

The Financial Conduct Authority has flagged up 2017-2018 as a period in which a wave of interest-only mortgages sold in the 1990s and early 2000s will reach maturity. It estimates that almost half of these homeowners will not have the funds available to pay off their loan, and that many will explore equity release as a way of finding the cash. Whilst some may decide to downsize, others will be keen to remain living in familiar surroundings. For those aged over 55, equity release can be a good choice as it enables them to stay in their home for as long as they want to, with the outstanding mortgage loan being repaid from the cash unlocked from their property. The most common equity release schemes are mortgage-based schemes secured against your home and repaid from the sale of your property, when you die or move into long-term care. These are known as ‘lifetime mortgages’ and allow you to take out a loan on your property in return for a lump sum. Last year, the average equity release customer accessed nearly £78,0001 from their property, with more than one in five using the funds to clear an outstanding mortgage.

CHOOSING THE RIGHT PLAN

Equity release plans were in the past considered a controversial choice. However, new products that are underpinned by stricter industry standards and provide protection against negative equity now offer a better deal to many homeowners. Many people choosing equity release are opting for the drawdown type of lifetime mortgage which gives them the freedom to dip in and out of their housing wealth, and means that they can leave more of their equity intact to pass on as an inheritance to their families. Independent professional advice is essential; equity release isn’t the right solution for everyone. Releasing cash from your home reduces the value of your estate and the amount of inheritance you leave, so you should consider involving your children and dependants from the outset. Think carefully before securing other debts against your home. Equity released from your home will be secured against it.

(1 Key Retirement, 2017)

60% OF UK ADULTS DON’T HAVE ANY FORM OF LIFE INSURANCE

A recent survey has revealed that up to 60% of adults don’t have any form of life insurance. When asked why this is the case, the answers vary. Some people simply don’t want to think about life’s unexpected events and don’t believe it could ever happen to them. Here are a few stark statistics. It is estimated that every day in the UK, around 500 women become widows, more than 100 children lose a parent, and The Telegraph reports that approximately 75 men aged under 50 become widowers.

INSURERS PAY OUT

When asked why they don’t have life insurance, people often say that policies don’t pay out in the event of a claim, but in fact 97.2%4 of protection claims are paid. According to figures from the Association of British Insurers4, UK insurance companies pay out more than £10m every day on protection policies including income protection, critical illness and life insurance.

COSTS HAVE COME DOWN

Another common misconception is that cover is expensive; many are surprised to learn that life insurance premiums are in fact easily affordable. It’s a small price to pay when you consider that having no insurance could mean real financial hardship, especially for less well off families.

CASH WHEN IT’S NEEDED MOST

If you were to die, how much money would your family have to live on? Many families would find themselves running short of money very quickly. Your salary would stop, but the household bills would keep coming in. Even if you are not the main breadwinner, you may still be the primary care giver, providing housekeeping and other homebased services that are vital to your family’s well-being and would cost a lot to replace. A pay-out from a policy could make the difference between your loved ones facing a financial struggle at a challenging emotional time, and being able to maintain the sort of lifestyle they enjoyed when you were still around.

1 MoneySuperMarket, 2016 2 National Association of Widows 3 Winston’s Wish 4 Association of British Insurers, 2016 sampl