Mortgage matters
With rates rising, it is vital you are realistic about what you can afford
this is a warning to those of you with a mortgage. the rates on mortgage deals are getting more expensive, and the UK base rate has recently increased to 0.75%. So if you have a mortgage, you should check your existing deal to see if you can slice the rate down – you may gain thousands of pounds right now...
Here are your five steps to finding the cheapest deal… 1
Critically, work out your current loan to value (LTV) – the proportion of your property’s Current value you’re borrowing, eg, £90,000 on a £100,000 property is 90% LTV, lower is better, and this has a big impact on the rate you can get.
2 Benchmark your cheapest deal with a mortgage comparison.
For an easy benchmark of what’s available in your circumstances, start with a comparison site that includes all deals, including ‘direct only’, that aren’t offered by a broker. These include my mortgage comparison at mse. me/mortgagecompare and moneyfacts.co.uk has one too.
3 what counts these days is whether you’ll be accepted.
The good/bad old days of easy credit, where lenders would fling out deals to all and sundry, are long gone – getting accepted is today’s challenge. is your credit score good enough? Your credit history is a huge part of whether you’ll be accepted for a mortgage. So be careful not to make too many applications for other credit, and never miss a repayment. are the repayments affordable? Lenders won’t just check if you can afford the monthly repayments at the current rate, but they’ll also stress-test affordability if rates were 6% or 7%. If you’re close to the financial limits, reel in your spending months before applying.
4 Got savings?
They could get you a better mortgage, so borrowing a little less can have a big impact on your rate. For example, if you’ve a £150,000 home, and want a £137,000 mortgage, that’s 91% LTV, and the top five-year fix is 3.75%. Yet, use £2,000 of savings to reduce the borrowing, and you’d then be at 90% LTV – saving around £1,300 a year in payments.
5 to fix or not to fix?
Fixing gives you price and budgeting certainty that the rate won’t move for a set time. Generally you pay a little more to fix, but not much. If peace of mind that you can afford to pay is what’s important for you, err on the side of fixing, and fixing for longer – and right now with fixed deals being outrageously cheap, this is a good time to look at it. For more help, get my 60-page free remortgaging booklet at mse.me/remortgage.