This month, in the lead up to Christmas, I want to highlight why getting your mortgage in order sooner rather than later can be beneficial in the long run.
In the current climate, everything seems to be going up in price due to inflation, the cost of living, and energy and fuel price volatility, not to mention mortgage rates.
So now is the perfect time to review your mortgage and see if you could potentially save money or just protect yourself against further rate increases.
If you haven’t reviewed your mortgage in a long time, you could be paying too much interest and higher monthly payments, or be on a longer term when you can actually afford to repay it sooner.
Many people fall into the trap of falling on to a ‘Standard Variable Rate’ (SVR) with their existing mortgage provider.
This means that your initial deal has expired and you usually fall onto a higher variable rate, which can fluctuate if rates change.
This can make it difficult to budget your money effectively each month.
The Bank of England have increased the Base Rate a number of times this year and is currently sitting at three per cent, the highest in decades.
So if this is you, you’ll have seen your mortgage payment increase already.
We recommend taking a look at what rate you’re on first and see when it expires, if it’s not already.
You have two choices at this point. Either do a rate switch with your current lender and go on to a new deal with them.
This may or may not be the best deal available. Alternatively, look at remortgaging with another lender.
You can usually start this process within six months of your current deal expiring.
You could get a better overall deal, saving hundreds, if not thousands of pounds, rather than just sticking with what you know.
A mortgage broker will be able to advise you on what’s the best available option for your particular situation, the ability of a broker to review the market for you is now more important than ever.
The other thing to consider is remortgaging to consolidate debt that you’ve accrued over the years.
This must be considered carefully and your mortgage adviser will discuss the pros and cons with you.
If your main priority is to have more disposable income on a monthly basis, it could save you hundreds of pounds a month on your overall payments by putting everything into one manageable payment with just one interest rate.
The downside is that it may be spread over a longer period of time, meaning more interest could be paid back in the long run, so it’s crucial you weigh up what’s more important to you.
The new interest rate available will depend on your ‘Loan to Value’ (LTV). This is the amount your mortgage is, versus the value of your property.
Lenders will conduct a new valuation of your property to determine what Loan to Value bracket you fall into.
Generally, the lower your Loan to Value percentage, the better the interest rate you’ll get, so it’s worth considering if it’s possible to reduce your mortgage balance with an overpayment, to lower the Loan to Value percentage bracket.
With Christmas and New Year fast approaching, now could be the time to review your mortgage and see if you can put yourself in a better financial position for the beginning of next year.
If you’re too busy getting the Christmas presents organised, then January is next best time to look into it.
Hope you’ve found that useful. Wishing everyone a very Merry Christmas and Happy New Year when the time comes and see you all in January.
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