09:21 25 October 2013
When it comes to monthly expenses, the mortgage perhaps takes the majority. If you are looking to cut costs, then this is the best place to start. So how do you do all this?
One of the recommended ways is to ensure that you pay as little interest as possible. Switching might sound like a very tiresome process. However, once you are through with it, you will reap the benefits for sure. If you’re paying a Standard Variable Rate of about 4 per cent and if you have 20 per cent equity in your property, your mortgage payments would reduce and thus you can save a bundle.
Breaking down the Standard Variable Rates
Fixed mortgages attract penalties when you switch. If this happens, then any savings you had in that nest egg are wiped out. So you should pay attention to the mortgages that you have.
Keep an eye out on the fees
Arrangement fees vary from company to company. If you are contemplating about switching mortgages, then look out and compare the fees that companies charge. You should avoid including the fee to the mortgage. You will end up paying more for that.
Overpaying the mortgage
If you can afford to pay something on top of what you are currently paying, this is better since you end up paying off the total faster. The interest is minimized.
However, you have to check on the penalty for making overpayments. Find out more about this from your lender lest you get “sucker punched” on the penalty.
Altering the mortgage term
How does this work? The shorter the mortgage term, the lesser the interest rate and the more you make in terms of savings. At first you might end up making astronomical payments but it’s a small sacrifice if you intend to be mortgage free. However, you will need to talk with your lender to make this possible.
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