How to Cut Your Mortgage Costs   A Simple Guide

Do your homework

Understanding the current market conditions can save a bundle, in the short-term as well as the long-term. Even if you’ve been with the bank for some time, do your research and understand what other mortgage loan products are available.

You will end up with a much better deal by putting some time into a little research.

Take advantage of free advice

Go spend some time with a number of mortgage brokers. They are more than happy to offer you free advice. Typically, you will find they have access to deals unknown to the general public.

Be certain the broker you deal with has a keen understanding of the market, and does business with several different lenders. This will ensure you are in business with someone who has the ability to give you the best deal.

Clean up your credit rating

Check your credit report and clean up any discrepancies on it. Make sure bills are being paid on time. Also, be certain you are registered to vote at your present address.

Making sure your credit rating has been optimized, will help you obtain a better mortgage loan product.

Minimize your loan-to-value

The best mortgage deals are offered to those with the biggest deposits. Do whatever is possible now and increase your savings, so you can walk into your lender and get the best deal possible.

The bigger your deposit, the more interest you will save in the long run.

Consider an offset deal

An offset loan product is beneficial in reducing the amount of interest you pay on your mortgage loan. For example, if you are purchasing a 200,000 pound mortgage, but have 30,000 pounds in savings, you’ll only pay interest on 170,000 pounds of the mortgage.

A current account mortgage can also be attractive. It combines your current account balance with your savings and mortgage, to reduce how much you pay. You don’t pay tax on the savings either.

Consider an interest only loan

Most monthly mortgage payments include the capital plus the interest. Although, most lenders will allow you to only pay the interest each month. This dramatically cuts down on your monthly mortgage payment.

The downside to this type of mortgage repayment plan can be costly, as the capital is due at the end of the mortgage term. For this type of loan, most people look into a high return investment product to offset the amount owed in the end. This type of loan product carries great risk. At the end of the term you could be facing a shortfall.

Remortgage into a smaller monthly payment

By watching the market closely, you can take advantage of a fall in the interest rate if you start with a variable rate mortgage loan. Make sure to shop around when considering a remortgage. A little research could end up saving many pounds.

Pay your mortgage fees in the beginning

As time passes, you’ll pay interest on them during the mortgage term. This will end up costing you more. Eliminate the extra cost, and just pay the fees up-front.

Think about a mortgage payment holiday

It is possible to put your capital repayments on hold for a fixed period of time. Beware, the interest you skip during this period is added to the mortgage which increases the amount of capital you owe. Each month which passes without a payment made, increases the amount of interest charged due to the outstanding balance increasing.

Overpay on your loan each month

The ability to overpay your monthly mortgage is a true asset. You can greatly reduce the amount of interest you pay over the length of the loan. In the long-term, that means saving thousands of pounds. Most lenders will allow an overpayment of up to 10% a year without a penalty. In addition to saving pounds, this will help you build equity faster.

Keep remortgage in mind

If you have held onto a variable rate mortgage for some time, do some shopping around. Make certain of the repayment charges involved in remortgaging from your lender. Repayment charges can be quite costly sometimes.

A long-term deal is to your advantage

Keep in mind, arrangement and completion fees for a new mortgage loan is costly. Also, a long-term deal will prevent you from having to look for a new deal every couple of years.

Don’t miss a payment, ever

Most lenders charge a fee for being late with the monthly mortgage payment. In some cases, they even fine you for writing a letter to let you know you’re in arrears. If it is possible, set up a direct debit plan with your bank account to automatically pay the monthly mortgage. This will help reduce the chance of late or missed payments.

Be aware of early repayment charges

If you decide on a remortgage product, understand what the cost will be for early repayment. This is typically thousands of pounds.