Case Study / Remortgage
Mr and Mrs A are both employed on joint salaries of around £80,000. They have savings and own their home valued at around £300,000. There is an outstanding mortgage of £150,000 with ABC Bank on a standard variable rate of 4.74% paying around a £1,000 per month. They also have around £10,000 outstanding in other commitments which are currently costing the region of £200 per month and require a further £5,000 to update their bathroom. They have heard that they can reduce their monthly costs and have requested a review with a view to raising the additional funds to consolidate and make the home improvements.
The requirements are:
Keep the mortgage over the remaining 19 year term
Reduce monthly cost with a lower rate
Consolidate the loan
Raise funds for the home improvements
Minimise any costs involved in the remortgage exercise
Our recommendation was to remortgage to XYZ Bank for a total of £165,000 capital repayment over 19 years with a 5 year fixed rate of 2.69% now costing monthly £901 per month, a saving of £100 per month plus a further £200 saving on the loan that was repaid.
The overall cost was only the arrangement fee for the loan of £995 that was added to the loan with the XYZ Bank offering a free valuation and Legal remortgage costs. Despite the arrangement fee the net overall saving to the clients over the 5 year period would-be £4,945 approx. Over the 5 year period assuming no change in current rates. Clients are now able to save towards their next family holiday.