Look For Ways To Cut Your Long-term Mortgage Costs

Homebuyers were left disappointed last week when the Bank of England’s Monetary Policy Committee decided to leave the base rate of interest unchanged at 5.5%. Those on Standard Variable Rates (SVRs) have not all seen their rates come down since the Bank’s last cut in December, but many could make savings by moving their mortgages.

There are plenty of remortgage offers on the market, and it is important to look further than the headline rate which help get mortgages to the top of the best buy tables. Borrowers need to work out the overall cost of the mortgage, including arrangement fees, and taking into account offers such as free valuations or legal work.

It is equally important not to be blinded by the “freebies” as these are thrown in as enticements, but might be accompanied by a higher interest rate as the provider is unlikely to give away something for nothing.

These days arrangement fees can be set at thousands of pounds or as a percentage of the mortgage – which can be even higher. Set fees can be better for higher mortgages; percentage fees may work out cheaper for lower mortgages.

It is certainly worth asking a mortgage broker for advice and guidance. They can trawl the whole of the market to find the best deal to suit your circumstances.

Sometime remortgage deals can benefit from low loan-to-values (LTV) as owners have built up a lot of equity in their homes. Abbey has a fixed rate of 5.57% for 2 years for a £1,999 fee up to 90% LTV. Woolwich has a tracker at 0.14% over base rate (that’s 5.64% now) for two years for a £995 for an LTV up to 80%. Leeds Building Society has a 5.25% rate for a £999 fee for LTV to 80% on mortgages up to £250,000.

Paying more than your repayments can reduce your long-term outlay and reduce the length of your mortgage. On a 25-year repayment mortgage of £100,000, overpaying by £50 a month would reduce your mortgage by four years one month and reduce the overall payment from £220,365 to £185,107. That’s worth consideration