With spring in the air and April 6th and the new tax year getting close, it could be time to take a fresh look at your financial arrangements. A financial spring clean could be in order.
At Continuum, we believe that it is the ideal time to take a look at your mortgage arrangements, and to see if a financial spring clean could help you pay less to buy your home.
Look at your mortgage
If your mortgage is your single biggest monthly expenditure, cutting its cost is likely to be a very effective way to save money. But surely you hunted around for the best deal when you took out your mortgage. Are there really likely to be any savings to be made now?
The answer, if you have had your mortgage for a year or two is almost certainly ‘yes’.
There are three reasons why.
The first is that if your introductory offer has ended, you will be on your lender’s Standard Variable Rate (SVR). This will be substantially more than the introductory rate because your lender is hoping that you will not bother to shop around.
The second may be less obvious. The relentless rise in house prices means that the home you bought a few years ago may be worth substantially more than you paid for it. This could mean the money you borrowed is now a smaller proportion of its current value. This affects the Loan to Value (or LTV) ratio. Mortgage lenders prefer to lend to people with a low LTV, because it means that if things go wrong and you cannot keep up repayments, it will not be their money at risk if the property has to be sold. If house price inflation means that you now own 50% of the value of your home they can afford to offer you a lower interest rate.
Of course, they might not suggest this themselves, as they would prefer that you pay more.
The third reason is a little more straightforward. Bank of England Base Rate is at a historic low of just 0.1%. this means that lenders can borrow money cheaply, and they can afford to lend cheaply as a result. There are some record low interest rates available.
So, what can you do?
It could be time to shop around for a new mortgage. You need to find a deal that works better for you, use it to pay off your old lender, and enjoy having more money in your pocket as your monthly payments may be substantially reduced.
Before you go anywhere, challenge your current lender to give you a new offer as it could reduce the fees you pay to get a new deal. Remember, it makes a great deal of money from you and it wants to keep your custom. Getting a better deal from your current lender could be the easiest way to save on your mortgage.
If they don’t want to offer you a better deal, or perhaps even if they do, it is time to look at what else is available. There are many lenders and some may be keen on winning your business, and prepared to offer an attractive remortgage deal. It could save you money with a new introductory rate for anything up to five years, and when that finishes, as an experienced remortgager, you may be able to shop around again.
But beware of the pitfalls. As mortgage interest rates have dropped, some lenders have significantly increased their fees. You may have to pay an exit fee to leave your current lender and, depending on your deal, an early repayment charge as well, especially if you are still in their introductory period.
So, should you remortgage?
You might need some expert help to work out if remortgaging is right for you. Of course, you would also be better off if you had an expert to guide you through the hundreds of remortgage deals available too.
At Continuum we can arrange a mortgage review which would show you exactly what you would gain by remortgaging and help you find the most suitable deal available.
A call to Continuum could help you find the best deal from across the whole mortgage market, including deals that are not publicly advertised.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable mortgage products, you should seek independent financial advice before embarking on any course of action.
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you re-mortgage.