BH Mortgages director Lewis Chambers discusses his top tips for managing your mortgage costs in 2018.
If you are looking to re-mortgage in the new year, changing your provider could make a real difference to the money in your pocket. Here is some of my top tips:
1. It’s all about good timing
It can take time to switch your mortgage so you should start looking roughly 14 weeks before your current rate expires. We pro-actively contact our clients four months before an existing deal comes to an end. Planning will save you being automatically transferred onto a more expensive variable rate mortgage. Likewise, if you switch too soon, some mortgage products will include an early repayment charge of up to 5% of your outstanding loan, which can add up to several thousands of pounds.
2. Don’t be sold by a low interest rate:
The lowest interest rates and seemingly cheapest deals are used by banks and lenders to market to customers, but they typically have larger fees some over £1,000, which increase the overall price of the mortgage. It is better to look at the total cost taking into account any associated fees and special offers, as well as the rate, to get the cheapest deal overall. We will always do a fair comparison, we can even show you the cash differences on a deal with a product fee vs a deal without using our unique technology.
3. Watch out for the word “Free” – you don’t get something for nothing
Many mortgage products now come with free valuations, no legal fees, the promise of cashback and more, however, these usually come with higher interest rates, working out as more expensive overall. It’s good to be on the ball and look at the cost of legal fees vs cash-back offers to see which is the bigger incentive. With some cashback products paying as much as £500, you could be better off taking the money and still spending on associated fees. We will always look to recommend the best deal taking into account free incentives vs a small cost and advise accordingly.
4. To fix or not to fix? And how long for?
Two-year fixes usually offer the lowest fixed interest rates, but after the bank of England increased its base rate and with more rate rises anticipated in 2018, many people are now looking to lock into the current low fixed rates for longer. Opting for a 5-year fixed rate product could be a good strategy to keep your mortgage payments consistently low and avoid any further rate surprises until 2023. There is currently very little price difference between the five-year fixed and the two-year fixed propositions.
5. Keep an eye on your credit
Any lender will need to know that you’re sensible with your money and can afford to make repayments on your mortgage. So, in the weeks and months running up to applying to a remortgage, it makes sense to manage any existing debts and hold off applying for extra credit cards or loans to get the best credit score and unlock the best mortgage deal for your needs.
6. Loyalty counts for nothing, lenders are there to make a profit
Rather than staying with your incumbent lender or current bank account provider, it pays to shop around. There are over 80 lenders in the UK and many offer lower rates for new customers than they do for existing customers. If you do find another lender with a better deal, don’t fear the break-up admin. Your new lender will appoint solicitors and talk to the old lender to switch your mortgage for you at no extra cost. You have nothing to lose as our professional teams take ownership of your case so you have to do very little and we will progress absolutely everything.
7. Use a professional broker A broker can help you navigate the mortgage market minefield, make the application for you and chase the lender on your behalf saving you sleepless nights, hours of time and heaps of money.