Reviewing
Your Mortgage Could Save You Thousands
Not
Reviewing Your Mortgage Will Lose You Thousands
The Bank
of England and The Fed have both signalled an end to massive money supply, cheap
credit and low interest rates. This means that interest rises may be coming soon,
so now is a good time to review your mortgage deal.
Some
of you might be on the standard variable rate, usually the most expensive rate,
while others could be on existing fixed or discount rate deals.
You
should review your current mortgage deal and diarise key dates, such as the end
of the fixed rate or discount deal.
Lenders
normally tie you into a set term on a fixed or discounted rate with hefty penalty
charges to come out. At the end of the period, your loan will usually revert to
the standard variable rate, which will inevitably be higher. The lender is not
going to inform you that they can find a better deal for you, so you need to be
aware of these dates and start looking for new deals a couple of months in
advance.
Let
me give you an example. I bought a buy to let investment 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 during the two years. Towards the end of the deal
term I asked my broker to find a better deal.
My broker
had not informed me that the initial rate was expiring and that my payments
would increase, or that I could save money by switching to an alternative rate
or lender.
After
searching the market, I decided to stay with the same lender and switch to one
of their new fixed rates. This saved on new surveys, legal fee and hassle.
How
much did I save by switching to the new deal? The new pay rate was almost half
the old rate at just £540, a saving of £510 per month! That's £6,120 per annum
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!
Had
I done nothing, I would have been paying even more that £1050 per month and
would have been exposed to interest rate rises, which have since increased.
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.
Watch out for my new 'Money Tips' podcast launching in January 2019
See also:
Why Property Is The Best Investment
