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10 steps to saving money on your mortgage

mortgages-for-doctors-dentists-save-moneyThis year and beyond

Fast forward 25 years and this half-a-decade past could well be viewed as the best time in history, ever, so far, to remortgage. Economic uncertainty and fear of deflation has kept the UK interest rates at rock bottom lows for over seven years and whilst not everyone will be able to save money on their mortgage, it is worth taking an hour or two to review your position and make sure.


remortgaging-for-doctors-dentistsThe wind behind the sails

For seven years, the Bank of England (BoE) have retained a 0.5% base rate, meaning the cost of financing a home has been more competitive than ever before.

Fear of deflation and effects of the wider global economy have prevented the BoE from raising rates, however, the reason that remortgaging is still high on the agenda of most UK households is that, eventually this luck will run out, and eventually the rates will start to rise, even if this may not be until 2017, which is the latest predictions.

This unique predicament is what is keeping the remortgaging boat afloat.


10 steps to saving money on your mortgage

1Check your current deal 

It may sound like the basics but it is always surprising to find out that a good number of mortgage holders don’t know the deal they are on. Make sure you understand:

  • The current rate of interest, total monthly repayment, loan amount outstanding, term of loan
  • The type of loan – is it fixed-rate, tracker or discount
  • Any penalties for early repayment?

Calculate your LTV

2The LTV represents the percentage of your home’s value that is borrowed already.

To determine your LTV, your lender will divide your loan amount by the home’s appraised value or the purchase price, whichever is lower.

Essentially, the lower your LTV the more equity you have in the property and it is highly likely you will be able to access better mortgage products as a consequence.

If your LTV has gone down recently, perhaps as a consequence of a revaluation on your property, it could means better deals await for you.


Beware of SVR’s

3If you are currently on a lender’s Standard Variable Rate (SVR) you could be paying over the odds, as many fall at over 4 percent, which is significantly higher than many fixed or discount deals available right now. With a decent credit score and over ten percent equity in the property, savings are highly likely from switching providers or fixing a rate.


Compare your options

4Once you understand your rate, term and LTV, you can now compare the market. Comparison sites is one route or use a professional mortgage broker who can compare all your options as well as provide advice on the best options for you and your family.


Factor in the fees

5Lenders have a habit of cleverly dressing up the products they are selling, so sometimes an attractive interest rate comes with a high “arrangement fee”. Because it is a “one-off” fee, many are fooled by the premise that they will pay up-front but save much more during the loan term.

However, this isn’t always the case. Sometimes an unusually high “arrangement fee” will counter balance with interest savings, particularly over a short term loan.

Ensure to look at total cost of the mortgage, including interest and fees, to make an accurate assessment.


Will your application be accepted?

6The days are long gone where mortgages were given out like hot cakes, and getting a mortgage application accepted is now half the challenge.

In advance, brushing up your credit history can help, so ensure that there are no expired contracts at old addresses, avoid missing credit card payments and never withdraw cash from credit cards or take out payday loans, as all these can leave a nasty black footprint on your file, that can easily upset the mortgage application. Use a credit reference agency such as Experian (there are many more) to check your status and save unnecessary surprises.


Will you pass affordability checks? 

7The latest in mortgage regulation following the “credit crunch” is an extra layer of protection for lenders by testing the affordability of a mortgage product should interest rates rise, to say seven percent.

Some lenders fail your application on the grounds of affordability, even though ironically you would be moving to a cheaper mortgage product and therefore saving money. Hmm, go figure that one out!


Is Fixed or Tracker best? 

8With continual low rates of interest, a Tracker could be an option, especially if you want flexibility. Fixed rates guarantee that should rates rise in the near future, that you will still pay a low amount until the end of the loan term so it all comes down to if you want to take a risk or have the security in knowing your monthly repayments.

Be careful not to fall into the Tracker trap and leave it too long to switch to a Fixed rate if rates start to rise – you may be left with no lender willing to accept your application for a fixed rate, or locking you into unfavourable deals.


How much would you save from switching?

9Use our mortgage tool to work out initially if you think you can save from switching. Then speak with one of our mortgage advisers to help you secure the best deal.

calculator-icon-only

Try our Mortgage tool here

– See rates and deals available to you
– For illustration purposes only
– Seek the help of a mortgage advisor for today’s deals

 


Use your savings to unlock better rates

10If you have savings they are probably not earning much income right now and they could certainly be put to good use to lower the LTV on the mortgage. Generally, for every five percent you can lower your LTV between 95 percent and 60 percent, you will be able to access better mortgage products.

Using your savings to go towards your property could save hundreds per year on your mortgage repayments and mean you pay less overall towards your property over the entire loan term.


As a final note, rates could get cheaper still, and timing will be the key for you to maximise your savings.


ChrisDental & Medical Financial Services can give advice and guidance on all mortgage products and which meets your personal and family needs best. Call Chris today.
icon_phoneTel: 01403 780 770

 

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