Change your type of mortgage – until around a year ago, it used to be said that if you were on the standard variable rate offered by your building society then consider swapping to a fixed, discounted or tracker mortgage. But currently, with interest rates at such a low level, this is not always the case. The standard variable rate can be lower than the other rates offered without having to move and get a tie in. It is still worth while looking about at what your building society has on offer, but do not always think the fixed offers are the best.
Change your building society – not always cheap by the time that you consider the completion / exit fees and the initial fees of setting up a new mortgage, but if you have a large mortgage there may be a saving to be made by swapping not only to a new type of mortgage, but to a new bank who is offering better interest rates and mortgage products. Do take into account all associated exit and set-up fees.
Extend your mortgage – only really for those that are in desperate need of sorting out their finances, but if you really cannot manage your present monthly repayments then it might be worth talking with a financial advisor and your lender round extending the term of the mortgage. This reduces the monthly repayment element of the loan and spreads out the load. But, the interest element is going to reduce much more slowly and in the long term it is not going to save you any cash. Only really a last ditch resort, which is better than losing your house!
Pay off some of the mortgage – not all building societies will go for this one, but if you have a few thousand to spare sitting in a savings account it may work out better, assuming the savings are earning a lower interest rate than you are being charged on your mortgage, if you were to use some or all of that money to pay off a few of your load. But, some building societies will apply penalty charges and you might be leaving yourself with definitely no savings, which is not a good idea on a rainy day.
Move to an offset mortgage – following on from paying off several of the loan, several banks will allow you to move your mortgage to an offset mortgage. With this you basically have a huge overdraft on a present or savings account. The overdraft is the mortgage and as you make payments into the account the mortgage reduces, so you are charged less interest. If you need to take a little extra out one month, for instance to refit your kitchen, then the cash is ready and available for that. It is a magnificent idea for those who get heaps of their earnings through bonuses or seasonal payments but if you are on a regular wage, the slightly higher interest charges might end up costing you more than you could save.
Guest post written by Keith Lunt of Compare UK Mortgage Rates. For more ideas, call into the mortgages blog!
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