Last week, the Governor of the Bank of England George Carney warned that interest rises would be coming in the near future. Now is the time to review your mortgage deal.
Review your mortgage deal and diarise key dates, such as the end of the fixed rate or discount deal. Lenders will often tie you into a period when offering a fixed or discounted rate. At the end of the period, you will be reverted back to the normal variable rate, which will inevitably be higher. You need to be aware of these dates and start looking for new deals when they come up.
I will give you an example. I bought a buy to let property 4 years ago with an interest only mortgage costing £1050 per month.
I was tied into the initial deal for two years and there were heavy exit penalties if I switched, paid it off or remortgaged. At the end of two years I asked my broker (who had not informed me that the deal had ended and I could save money) to find a better deal. After searching the market, I decided to stay with the same lender and switch to one of their new rates.
How much did I save?
The new pay rate was almost half the old rate at just £540, a saving of £510 per month! That's £6,120 per year or £12,240 over the 2 year deal period (for the sake of the example I'm ignoring the lender fee that was added to the loan adding around £5 per month to my repayments). This comes straight off the bottom line and I would've had to earn £18,000 in rent before tax to make the same amount of money. Not a bad result for making a phone call!
Bonus Tip...you don't necessarily have to switch lenders to save money. You can stay with the same lender and switch to a new deal without remortgaging or refinancing. Remortgaging may not be convenient for you, as it involves new credit searches, references and valuation. In some cases you may not qualify for a new mortgage, due to age or income, but will be able to switch deals with your existing lender.
Some mortgage brokers recommend remortgaging to a new lender because this pays them more commission. Yes, your lender pays your broker an introduction fee which is declared on your offer. Action...Check your mortgage offer and papers today or call your lender or broker.
Tomorrow, I'll have another money tip which can save you hundreds of pounds on your household bills.
Listen to this episode, from Money Kelly on Anchor: Money Tip Review you Mortgage