A simple trick to save thousands on your mortgage
Did you know that you could save thousands of pounds off your mortgage payments just by switching to a new deal?
The fact that mortgage rates are at an all-time low, there has never been a better time to try and find a cheaper deal, particularly if the Bank of England begin to raise interest rates, as is forecast for early next year.
So what are you waiting for?
There are a number of ways you could slash your monthly budget but other savings seem like a pittance compared to how much you could save by remortgaging.
If you are currently on a high rate, and you can move to a much lower rate of interest the potential savings could run into thousands of pounds a year.
The best fixed rate deals (based on 60% LTV) are currently under 1% - if you are still sat on your lender’s standard variable rate (SVR) there is a big incentive to act now.
How to get a good deal
Before you decide to switch onto a better deal, then you may want to do some homework first. Depending on your current deal, you may be penalised if you switch to another mortgage – particularly if you are on a fixed-rate deal.
Many mortgage providers will expect you to pay a fee, known as an early redemption charge, to exit your mortgage (usually on fixed rate or discounted variable rate mortgages),
Depending on how many years left you have on your mortgage, and how much outstanding debt you have this could run into thousands (typically the fees are charged as a percentage of the amount you still owe) but on the other hand, it may not be as much as you think - it's worth checking the terms of your mortgage to clarify. If the fee is high, it may be better to wait it out.
However, you don’t always need to wait until your current deal comes to an end to switch mortgages – even if an early redemption fee applies, if this works out less than the overall savings you’ll make, you could still save yourself a great deal of money.
The best way of working this out is to calculate the savings over the duration of your deal. If you have two years left on your mortgage for example, but switching to a new deal could shave £200 a month of your repayments then the new mortgage will be an initial saving of £4,800.
Taking into consideration any exit fees (and also any new arrangement fees as these also may apply) subtract this amount from those initial savings and you'll have your final figure. If it's not a minus figure you've just reached, you could be onto a winning deal!
Stick or Switch
You don’t always need to move to another lender to find a better rate than you're currently paying – your own provider may be able to drop your rate or switch you onto another deal, so it’s always worth speaking to them to see what they can do for you.
This may save time and expense as it may mean you don’t need to go through the full application process as you would with a new lender.
However, although you may feel an affinity with your current provider, they don't have to reward you with the same loyalty so it could pay to check out mortgage deals elsewhere – although you may have to consider additional fees to move your mortgage to another provider, the savings you make could make this all the more worthwhile.
If this all sounds rather complicated and a lot of hard work, then why not consider the services of a mortgage broker.
It can be a time-consuming task trawling through the hundreds of mortgages that are on offer but a mortgage broker can do all this legwork for you. All they need to do is an initial fact-find to work out your requirements and circumstances and they will be able to search their database for the best mortgage deal that fits your needs.
A high street provider won’t do this for you – they’ll just show you the deals that they offer rather than making you aware of the competition. Why would they? However, a broker can pull together a list of deals from a wide variety of mortgage lenders – and often they have access to deals that are only available through a brokerage.
A broker will be able to calculate the fees that you need to take into consideration, so you can work out whether switching your mortgage could indeed save you thousands of pounds.