Simple mortgage trick that can save you £391 a month

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Homeowners are being urged to take advantage of an easy mortgage trick that could save you thousands of pounds each year.

switching your mortgage Dealing with a cheaper rate can reduce your monthly payment.

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Homeowners can save thousands of pounds by switching to a better mortgage dealcredit: getty

Rate of interest going up and that means for 2 million more misery Families with variable or tracker mortgages,

That’s because these are linked to mortgages bank of englandbase rate of .

Base rate goes up every time, so do your monthly mortgage repayment,

Interest rates have been hiked four times since last year, from a low of 0.1% to today’s rate of 1%.

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he is added Hundreds of pounds on monthly mortgage Repayment for millions.

At the same time, the best fixed rate deals are disappearing from the market.

The average two-year fixed rate mortgage was 2.20% in November 2021 but has increased to 3.03% today.

Meanwhile, the typical standard variable rate (SVR) — which is the rate you go into automatically when your deal expires — has risen from 4.41% to 4.78% over that period.

Homeowners are being urged to act now while there are still great deals available – and it could save you thousands of pounds.

Alex Hasty, director of comparethemarket.com, said: “If you’re at a lender’s standard variable rate, you’re likely to overpay.

“At a time when interest rates are rising, borrowers who renegotiate on a fixed rate mortgage product not only have peace of mind on scheduled monthly outgoings, but can also save a significant amount in the process.”

According to comparethemarket.com, the average homeowner can save £391 per month by switching to a better deal.

Those with a typical mortgage of £237,000 would have a monthly repayment of £1,241 if they are on an average standard variable mortgage rate of 4.78%.

This adds up to an annual repayment of £14,892.

But if you switch to a two-year fixed deal, your interest rate can drop to 1.78%.

As a result, your monthly payment will drop to £850 – a savings of £391 per month.

At this rate, your payment would be £10,200 per year, a savings of £4,692 per year compared to SVR.

Those who want long-term certainty on their mortgage repayment can do just fine in the long run. Some companies will let you recover for 10 years or more Ultra-Long Mortgage Deals,

According to Comparative Markets, a typical five-year fixed deal currently carries an interest rate of 1.95%.

This means a monthly repayment of £870, adding up to £10,440 per year.

The other advantage of locking in a fixed rate is that you are protected from further interest rate increases.

Moneyfacts finance expert Rachel Springall said: “Lenders sitting on a variable rate may want to lock themselves into a competitive fixed rate mortgage deal to protect themselves from rising interest rates, perhaps sooner rather than later.

“Fixing longer periods may be a logical choice for peace of mind with mortgage payments when other home costs are rising.”

How do I convert my mortgage to a better deal?

change your mortgage Relatively easy, but you should do some investigation first.

Make sure you are not tied into the term of a deal as leaving early can mean a hefty fine.

But that’s not likely to happen if you’re on a standard variable rate with your provider.

Shop around different mortgage lenders to find the best deal. If you are not sure, a broker can help you with this.

a mortgage calculator Can help you calculate your monthly payments as well as the total amount you will pay during the term of your loan.

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lengthen oneself mortgage termAnother way is to reduce the monthly payment, for example 25 to 30 years.

However, this will usually mean that you will end up pay more in interest during your mortgage, so it’s not always the best route.

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