We are all worried about our finances in this current climate and without trying to be the voice of doom and gloom, it’s probably going to get worse before it gets better. Our mortgage payments are probably the most highest expenditure we have but could changing your mortgage actually relieve some financial pressures? Exploring the options within your mortgage and making a change could actually save you money and help with the current increase in the cost of living.
If you’re looking to save money on your mortgage, there are several strategies you can use to help reduce your total cost. This includes refinancing, making extra payments and more.
Product transfers
A product transfer mortgage is basically a remortgage with your current mortgage lender. It involves switching to a new mortgage deal with them, with a more favourable interest rate, usually at the end of a fixed term. After a fixed-term on your mortgage, where the interest rate stays the same, the interest rate will usually switch to the lenders Standard Variable Rate (SVR) which is often higher than the rate of the fixed-term. The process of transferring products is usually quite simple and it’s unlikely you’ll need a valuation on your property.
Remortgages
A remortgage is when you apply for a new mortgage with a different lender, but stay in your current home. The benefits of remortgaging can be reducing your monthly payments, securing a better interest rate and shortening the time it will take to pay back. It can also be a good option if you want to borrow more to afford home improvements or pay off other more costly debts, such as credit card loans.
Over payments
Not everyone will be in a position to do this but if you are fortunate enough to be, it’s certainly worth exploring for a long tern gain. Making a mortgage overpayment simply means paying more towards your mortgage than you have to under the terms of your home-loan agreement. Your lender will set a minimum amount you must pay back per month, but you’re usually free to go over that level at any time.
Increasing terms
Most people take out a mortgage with a 25-year term, meaning that they repay the loan over 25 years. But you could pick a term up to around 40 years, depending on your lender. By extending the term of the loan, you reduce your monthly repayments. This is because you’re repaying the loan over a longer period, and so at a slower rate. However, you’ll be charged more interest in the long term, because you’re borrowing money for longer.
Note that lenders will also have a maximum age limit – that is, if you’ll be so old by the end of the mortgage term that you might not be earning, you may not be able to extend.
Your mortgage is likely to be your biggest financial commitment. So it follows that streamlining your largest debt could produce the largest saving. For further information on how changing your mortgage could relieve some financial pressures, please contact us here.
