Make sure you have the best mortgage deal; this applies to new and existing borrowers;
New Borrowers: there are many ways to get a mortgage, you can go direct to a single lender, look at deals from a number of lenders, or use a mortgage broker to search for the best deal for you.
A mortgage is probably the single biggest financial commitment most of us will make and considering all of the available options at the start can have a significant impact on your long term finances. For example, a fairly modest 1.0% reduction in the interest rate for a £100,000 loan (20 year outstanding term, repayment) equates to a monthly saving of £53.50.
Existing Borrowers: If your existing mortgage has reached the end of a fixed, tracker or discount period, you may be able to remortgage without penalty. Moving to a new lender could save you money, particularly if your existing lender can no longer offer a competitive interest rate. As with new loans described above, you could compare the market yourself or employ the services of an mortgage advisor to make the necessary comparisons on your behalf. If early repayment charges apply, remortgaging may be unsuitable.
Check the mortgage fees; Anyone who has applied for a mortgage in the past will be more than aware that fees vary dramatically! Fees come under a number of different headings, including application, arrangement, valuation and legals, and vary from a fairly standard £1,500 all the way to over £5,000 or more in some cases. If you are considering a new mortgage or remortgaging your existing loan, to get the best mortgage deal it is essential that consideration is given to both fees and the headline interest rate.
Overpay; Overpaying is an unusual strategy to include on a list about how to save money on your mortgage, however with rates at all time lows, overpaying now could pay dividends if rates rise in future. The terms and conditions of most loans allow you to make reasonable overpayments without penalty (typically 10% of the outstanding balance per annum).
Offset; An offset mortgage allows you to link your current account and outstanding mortgage balances for the purpose of interest calculations. Your current account doesn’t earn any interest, but the amount of interest charged on your mortgage is reduced. Because mortgage interest rates are usually higher than those for savers (particularly after tax), the net result is usually positive.
Use an independent mortgage advisor; an independent advisor acts on your behalf to find you the best mortgaged deal and make the most suitable recommendation. Restricting yourself to just the products offered by your bank could mean missing out on some great rates elsewhere.
Review your Life Cover; Life insurance premiums have been falling for many years, and it may be possible to save money on your mortgage linked insurance policy by moving to a new company. Life insurance policies vary, and you should always ensure quality isn’t being sacrificed for a cheaper premium.
Sometimes, the best deal doesn’t always offer the best value, and to reiterate a famous quote:
“It is better to pay more for something you need than less for something you don’t, and frankly if the policy isn’t going to do the job, it frankly doesn’t matter how cheap it is!”
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note, this article is for informative purposes only, and should not be considered advice, before taking action, seek advice from a qualified professional.
By Adam Gardner