The recent energy and cost of living crisis has highlighted the plight for us all to save money, with people reviewing all their expenses and looking at ways of cutting costs. Martin Lewis, and other financial experts have been discussing ways of saving money and reducing bills, by reviewing contracts and switching utilities providers.
One other area to consider is your mortgage. While mortgage rates have increased, in a longer historical context, they’re still cheap and interest rates are low. There are lots of different options when it comes to mortgages, but before changing it is important to review your current arrangement and understand alternative options. Assess your mortgage and before shopping around consider the following:
• What is the rate? Plus monthly payments & outstanding debt.
• What type is it? Is it a fixed, tracker or variable rate?
• When is your current fixed deal over?
• When must it all be repaid? In 10, 20 or 25 years?
• What is the loan-to-value?
• Lastly, and most importantly… Will you be penalised to switch deals? If your mortgage deal has an early repayment charge it isn’t usually worth switching.
The type of mortgage you choose will likely be down to your particular situation, but before checking out the latest deals from mortgage providers, make sure you know the key difference between fixed rate and variable rate mortgages.
Fixed rate mortgage
This is ideal if you want to budget as it provides you with the security of knowing exactly how much you will pay each month. During the fixed period you will be protected against any rate increases (but also lose out if interest rates decrease), however remember to review it when coming to the end of the deal as you will automatically move on to the lender’s variable rate which is likely to be a lot higher than the fixed rate.
Variable rate mortgage
There are lots of options within this category with trackers, standard variable rates and discount rates being the most common types. With a variable rate mortgage your payments will move up and down depending on interest rates. It is more risky and unpredictable, however you may wish to go with this option if you feel rates are likely to decrease and you can manage any increases along the journey.
Mortgage lenders’ acceptance criteria differ from one to the next and it is worthwhile speaking to a reputable independent mortgage broker about your situation and discussing your options. McDougall McQueen have access to a network of financial advisors and mortgage brokers who can help you with your property purchase or re-mortgage.