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Save Money on Your Mortgage
How to save money on your mortgage
For most people, getting a mortgage to buy a property is the most expensive thing they do in their lifetime. By understanding the different rates and terms of a mortgage, UK homeowners can make significant savings. It is important to know that mortgages can be transferred to different repayment plans so below we highlight some of the key things to look out for in order to save money on your mortgage:
Keep checking interest rates
If you have a fixed rate mortgage, it is important to keep checking the different mortgage rates available in the market. If you can find that there are much better rates being offered, it could be worth transferring to a new mortgage. The best time to switch is within the last 3 months before the mortgage term ends. There are expensive fees for repaying your mortgage early but these decrease if your repay within 3 months.
Try reducing the number of years
Before accepting your mortgage agreement, it is worth seeing if you are in a financial position to reduce the length of your mortgage term. For example, if you can reduce your mortgage from 25 years to 20 years, you may pay slightly more in interest per month but you could save thousands and thousands of pounds in the long run. By having a long mortgage period (e.g 45 years), it is cheaper in the short run but far more costly in long run. Being able to reduce the length of your mortgage requires you to assess your income and expenditure carefully and understanding what you can afford.
Overpay each month
Homeowners can save money on their mortgage repayments long term if they are able to overpay their monthly repayments. If you feel like you are in a better financial position and are able to pay more than the monthly repayment, it will bring down the capital and reduce the interest and allow you to own 100% of the property much sooner. The interest you pay on your mortgage can be monthly or annually but if your repayment is based on a daily interest, you can overpay on your mortgage just before it is next calculated and you can make a saving just in time.
Some companies will limit how much you can overpay at around 10% each year. It is worth checking the terms of your mortgage agreement to confirm how much you are allowed to overpay. If you have more disposable income than the 10% limit, you can put your money into a savings account or peer-to-peer borrowing.
Avoid early payment fees
Mortgage companies charge an early repayment charge (EPC) of around 2% if you want to repay your entire mortgage early. Whilst 2% seems like a very small amount, it could be equal to a few thousand pounds in practice. The secret is to wait until the last 3 months of your mortgage where the early repayment charges may not apply. Other ways to overcome the early payment fees include selecting a mortgage beforehand that won’t tie you down for a long time if you are confident that you are going to pay early.
The advertised rate is 1.95%. However this rate will not be available to everyone and will depend on your individual circumstances and the loan to value ratio of your mortgage. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. Some partners may charge you a fee for helping you find a Mortgage or Secured Loan or other services they provide. MAKE SURE you check with the company before agreeing to any service if they charge you a fee and what the terms are. Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk QuiddiCompare does not charge a fee and does not provide any financial advice relating to mortgages. However we may on occasion receive commissions from IFA’s and mortgage providers, brokers and intermediaries for introducing you to them. The content of this site is meant to be informational, and it should not be considered financial advice. – See more at: quiddicompare.co.uk/mortgages.