Budget 2021: Rishi Sunak issues warning about interest rates
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The way in which people opt to pay off their mortgage will depend on their individual situation and type of mortgage they have. Financial commitments and personal priorities will also play an important role.
However, for some, upping mortgage payments in the short-term will be a worthwhile compromise for saving money in the long-term.
The topic of saving money on a mortgage is something which Alex Winn, Mortgage Expert at Habito, spoke to Express.co.uk about in the past.
He explained for some, remortgaging could be the right avenue.
Mr Winn described how people who have carried out home improvements could potentially see an increase in the valuation of their home.
“Home renovations can help increase the property value, build up your share of equity, and enable you to access a greater number of remortgage deals at more competitive rates,” he said.
“You could also use a remortgage to consider consolidating some debt – for example – if you took out loans or credit cards to pay for the home works.
“While this route may mean it ends up costing more over the whole length of the mortgage, it would reduce the day-to-day costs of the debt repayments if the monthly payment is cheaper.”
Among the expertise he shared, Mr Winn pointed out remortgaging could provide an opportunity to reduce the time it takes for a person to repay their mortgage.
And, this could even mean saving money overall.
“Remortgaging is also a good time to assess if the total mortgage length is still appropriate,” he said.
“If your monthly payment falls due to remortgaging, you could consider keeping the payment the same but reducing the years of your total mortgage.
“For example, you can ask to move from a 25-year term to a 20-year term.
“This would mean you will pay significantly less over the whole mortgage in interest and is a good option for reducing your total mortgage costs, which doesn’t require parting with any lump savings.”
Another path homeowners may want to consider is the ability to overpay on their mortgage.
Mr Winn suggested for some, it might make sense to deliberately make an overpayment on their mortgage.
“To do this, you’ll need to speak to your lender,” he explained.
“You can ask to make a one-off payment of up to 10 percent of the value of the mortgage, every year.
“So, if your mortgage was £100,000, you could pay off a lump sum of up to £10,000 for the year.
“The impact this would have would be to save you an additional £9,000 in interest repayments over the whole length of the mortgage, and make you mortgage free two years and nine months faster – a pretty great investment.”
The mortgage expert also shared his suggestions on how those remortgaging can access the top interest rate.
“To get the best interest rate when remortgaging, my three top tips are; firstly, make sure your credit score is the best it can be,” he said.
“Secondly, leave yourself plenty of time to speak to your broker before you need to switch, and thirdly, watch out for any extra fees associated with the deal.
“To expand on that last point – some mortgages have larger fees – of over £1,499 – which increases the overall price of the mortgage.
“Make sure you look at the total cost, taking into account any associated fees, to get the cheapest deal overall.”
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