Mortgage Advisor - Mortgage Trick ?

blackice_2

My girlfriend reckons her mortgage advisor sussed a way to outsmart mortgage companies...

I think it is BS but here it is...

Get a Interest only mortgage on existing mortgage, keep changing mortgage every few months to get the cheapest rates on introductory offers and put the remainder in a building society account to save up for your home and pay it off in the future...

sounds like an endowment to me but probably not as good!

plus there must be redememptions on the intro offers as everyone would keep swapping otherwise.

What do you think?

dunstonh

Savings rates are historically lower than mortgage rates. What you discuss isnt an endowment but works in a similar fashion. Would you do endowment now? of course not so don't do that either.

Why not go capital repayment and remortgage every few years to get the cheaper rate?

Also, it's not a way to beat the lenders. You are paying more interest to them as the balance remains high and isnt decreasing.

The only one to gain is the mortgage broker who takes the fees on the full balance every time you change mortgage.

Fairdo_2

The idea is a great one, but there would generally be a limit at those extremes.

Yes this could be done, but when you consider a basic remortgage can take 8 to 12 weeks on average, then they would need to apply for the new Remortgage before the applied one is completed!

There are only a limited few lenders that are giving a dramatic 3 month initial discount anyway and then there are often certain costs associated with Entry and Exit to each mortgage. Therefore, it is highly unlikely that this would be continued on too high a frequency.

Also, to bear in mind that each Remortgage goes through a new credit score. Lenders would soon get wise to the recent history and this would count against them more each time. Likewise, with the credit score system, it would end up failing the potential customer at that frequency.

There is nothing to stop people doing this every few years mind, but it depends on peoples individual circumstances and needs. However, people have to be very careful on Interest Only mortgages to make sure that they have the discipline to ensure that the balance is reduced throughout.

blackice_2

Thanks

I agree, it is only the Mortgage Advisor who wins, my GF is adamant on this though and you can't tell em!

Trouble is if she does this she will never actually know she would have been better off with the repayment way rather than this way.

Woby_Tide

Don't most mortgages come with an arrangement fee nowadays so the actual loan amount is going to be going up each time you move lenders surely?

payless

If she still decides to take this route, ensure she obtains the reasons in writing from the adviser