Maximizing Mortgage Savings: 6 Essential Tips for Homeowners
Whether you are taking out a new mortgage for your dream home or looking to re-mortgage there is likely to be a huge increase in your monthly repayments. In this blog Phil, an independent mortgage broker looks at ways to reduce that increase.
In the ever-evolving landscape of mortgage rates, today's homeowners are witnessing historic lows, with rates dipping below 2%. These unexpected rate reductions have left many of my clients astounded. If you're one of them, fret not. I'm here to share my top five tips to help you minimize the impact of the monthly payment increase and secure the best possible mortgage deal.
1. Shop Around for the Best Rates
Mortgage rates can vary significantly between lenders, similar to how you can find varying prices for car insurance or home insurance. The accumulated savings from even a slight reduction in your mortgage rate can add up over time. However, be cautious – different lenders employ distinct criteria to assess affordability. Each credit check negatively impacts your credit rating, making it essential to get it right the first time. Now more than ever, consulting with an independent mortgage broker is crucial. We understand lender criteria and can guide you to the best lender based on your unique financial situation.
2. Maintain a Pristine Credit Score
In the months leading up to your quest for a new mortgage, focus on maintaining an impeccable credit score. A higher credit score opens doors to more lenders offering better rates. Various credit score companies have different criteria and produce varying results. A great starting point, and one that's free, is Martin Lewis Credit Club, which can be accessed here: [Martin Lewis Credit Club](https://www.moneysavingexpert.com/creditclub/).
3. Consider Extending Your Mortgage Term
More lenders are now offering longer-term mortgages that allow you to carry your mortgage well into your later years. While extending your term may result in paying more interest over the life of the loan, it can lead to an immediate reduction in your monthly payments. You can always shorten the term when you refinance or commit to higher monthly payments without the obligation of a higher payment every month. Discuss this option with a mortgage broker, as most lenders have limits on the annual overpayment amount.
4. Optimize Your Loan-to-Value (LTV) Ratio
The LTV ratio measures the size of your mortgage relative to your property's value. The more of your property you own outright, the better the interest rate you can secure. LTV ratios are calculated in brackets, and they vary from one lender to another. Common brackets include 90% LTV (where you own 10% of your property and your mortgage is 90% of its value), 70% LTV and 60% LTV. If you're near a bracket threshold, it's worth exploring ways to move into the next bracket for a more favorable rate.
5. Explore Interest-Only Mortgages
Interest-only mortgages involve paying only the interest on the loan without reducing the borrowed amount. While this option may not be suitable for everyone, it can work well if you anticipate receiving a lump sum of money in the future, such as an inheritance, to pay off a portion or the entirety of your mortgage.
6. Secure Your Remortgage Deal in Advance
Proactive planning is key. Secure a remortgage deal up to six months before your current mortgage deal expires. By locking in a deal at today's rates, you protect yourself from potential rate increases. If rates improve, you can always switch to the lower rate before your remortgage is due.
Ultimately, the secret to securing the best mortgage deal lies in consulting with a reputable independent mortgage broker. Their knowledge and experience can save you thousands over the life of your mortgage while preventing failed mortgage applications from harming your credit score. It's important to note that while many brokers charge for their services, we offer a free service and will never ask you to pay a fee.
For any questions or assistance, please feel free to reach out to me at 01525 713111 or via email at phil@lovehomes.uk. Your financial well-being is our priority.