Tue 17 Apr 2018 View all news articles

How to save money on your mortgage

Around 3.4m people don’t know what mortgage rate they are paying, while 1.1m households are wasting £2.78bn collectively by sitting on the wrong mortgage deal, according to L&C Mortgages.

Sound like you? A mortgage is probably the single most expensive thing you’ll buy, so it pays to keep on top of it. Here’s how you can save money, no matter what tariff you’re on.

The lowdown on policies:

Don't get stuck with SVRs
More than a third of mortgage owners are on standard variable rates (SVRs) – meaning that four million households are throwing away an average of £216 a month by paying too much, says L&C.

Customers are usually put on SVRs when a fixed rate deal comes to an end. SVRs almost always costs more and lenders can raise their rates on these tariffs at any time.

If you've been switched to a SVR, then take a look at getting yourself onto another fixed rate deal, which allows you to lock in interest rates.

Do you have an interest only mortage?
There has been in a reduction in the number of people on these types of mortgages since 2013, when the Financial Conduct Authority warned that shortfalls in repayments could lead to people losing their homes. But there are still around 1.67 million people on them in the UK, that's around 1 in 5 mortgage owners!

These policies mean you only pay the interest, not any of the money borrowed, back during the mortgage term. But, when it matures, you will face a hefty bill and will need a plan to pay back the debt.

If you’re not sure you can afford to pay this all back, here’s what you should do:

- Assess your financial situation and see where you are when it comes to repayment
- Talk to your lender or mortgage adviser as soon as possible
- Start saving and set aside a dedicated account just for mortgage repayments
- Make sure you have a repayment plan in place with your lender, so you’re on the same page
- If you’re paying a high-interest rate, see if you can remortgage to a better rate
- As a final resort, consider selling your home and moving to a cheaper one

Consider a flexible mortgage
These allow you to make underpayments, overpayments and even take 'payment holidays' depending on your financial situation. This may be perfect if you have varied income, for example if you are self-employed. However, you may need to pay a higher rate to get the feature that you want. Plus, while overpaying can mean that you clear the debt substantially quicker, so you pay less interest overall, if your interest is worked out on a quarterly or annual basis then you might miss out on low-interest rates.

Source: Good Housekeeping

Need a change to your mortgage? You can arrange a free consultation with our highly recommended mortgage advisor here.

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