Without much doubt, a mortgage is one of the biggest financial commitments someone will ever make and with Brexit on the horizon, 2019 will certainly be an interesting year for your finances.
While it’s difficult to predict how this will affect your mortgage, there are a few simple things you can do to ensure you’re in the best possible financial situation. Below are some top tips to set you on course next year.
1. Look into remortgaging up to six months before your initial term ends
When the initial term of a mortgage ends, lenders transfer customers onto their Standard Variable Rate (SVR). This typically has a much higher rate of interest, meaning homeowners can be stung by up to an extra £4,000 a year. There are already over two million homeowners languishing on SVRs and paying over the odds, so make sure you don’t get caught out. Set a reminder to look into your remortgage options with a broker three to six months before your initial term ends. Just one month on your lender’s SVR can cost you hundreds of pounds in extra interest.
2. Overpay now, save big now, save bigger later
If you can afford higher repayments, and your lender allows you to, overpaying can reduce your overall outstanding balance, meaning you’ll pay less interest overall and reduce the length of the term, making you mortgage free sooner. Lots of lenders will recalculate the interest immediately so you’ll notice savings straight away. Be sure to check with your lender about how much you can overpay, since there’s usually a limit before a penalty applies. For most fixed-rate deals this is usually up to 10% of the remaining mortgage balance per year.
3. Switch before another potential rate rise
Another rate rise may well be on the horizon, so it’s important to look around for the best deals to guard against an interest rate hike or get stuck on an SVR. If you’re on a tracker mortgage, i.e. one that moves in line with the base rate, then switching now to a fixed rate can save you hundreds of pounds. In August when the Bank of England’s interest rate rose 0.25%, it added £12 a month to a £100,000 repayment mortgage and £25 on a £200,000 loan. This meant homeowner’s monthly bills rose from £449 to £461 (on a loan size of £100,000) and from £897 to £922 on a £200,000 loan.
4. Watch out for hidden charges
Remortgaging can save you thousands in the long run, but it’s also important to consider any other fees or charges incurred from switching, therefore reducing your overall potential savings. Some lenders have exit fees and early repayment charges, which could be as high as 5%. Using an online mortgage broker, like Trussle, can help find the cheapest deals based on true cost, taking into account any associated fees, charges or incentives, while offering a free service and creating a transparent application process.