The Bank of England is meeting shortly, and it is predicted that interest rates will rise once again. For those looking to remortgage, or seeking their first mortgage deal, this is more bad news at a time when household budgets are already under significant pressure. On top of this, the range of mortgage products on the market is becoming narrower.
So, is there anything you can do to make sure that your mortgage deal is the best it can be? One obvious step is to avoid the standard variable rate (SVR) as in a time of rising interest rates, these represent poor value for money. Here are some further ideas.
If you have a current mortgage, avoid going into arrears if you possibly can, because this will make it more difficult to get another good mortgage deal. It’s not impossible, but you will probably have to pay a higher amount of interest on a new deal.
For first time buyers with adverse credit records, it’s worth talking to a specialist broker to see what your options are. Some lenders have more flexible attitudes than others, and an experienced broker will know which ones to approach without blemishing your record further with a rejected mortgage application.
There are a few ways of reducing your monthly payments, but none of them really get past the fact that the loan has to be repaid with interest eventually. One way would be to overpay while interest rates are lower, so that you reduce the overall size of the mortgage, and can potentially get a better deal in the future.
However, not everyone is in a position to do this, and not all contracts allow it. However, most will allow overpayments of up to 10% per year, so check the T&Cs. Another way to reduce monthly payments is to extend the term of the mortgage, so you are repaying over a longer stretch of time.
Again, not everyone can do this because some lenders have age restrictions on when the loan needs to be repaid by. You will also end up paying more in the long term, because you will be paying interest for longer. It may also compromise your retirement plans if your pension is insufficient to cover the monthly repayments.
A more radical solution is to switch to an interest-only mortgage for a time. This means that you only repay the interest on the loan every month, rather than the loan itself. It might be a good temporary solution if your finances are really stretched, because it will significantly reduce the payments.
This is better than simply not paying, or underpaying, your mortgage, which will seriously damage your credit rating. However, the loan itself will still need to be repaid at some point, so it really is not a long-term solution to credit flow issues. Interest-only mortgages may also adversely impact your credit history, so check if this is the case with the advisor or broker.
If you are looking for IVA mortgage specialists, please get in touch today.
Your home may be repossessed if you do not keep up with your mortgage repayments.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
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