Most people enter into a mortgage and as soon as the docs are signed and sealed they forget about it. Some don’t even remember when it matures or what the rate is. At the point of renewal their broker or mortgage lender shows them a price and they think, that looks alright, and roll over for another two or three years. You could be throwing away a lot of cash if this is you!
I used a mortgage broker the first time that I ever entered into a mortgage but I know the market so well now that I am my own broker. I prefer to shop for my own rates. Here are three simple things that could help you save a bucket load:
1. Set a reminder
As soon as you secure a mortgage, if there is a chance of you forgetting when it matures set a reminder on your phone or computer. An alert two to three months before the mortgage matures is ideal. If it doesn't mature for 10 years or more, set a reminder to shop around for a new mortgage deal in 2 or 3 years' time.
2. Call your lender to quote you a new rate two or three months before maturity, then shop around for better!
I was on a deal of 3.26% for two years at which point my mortgage reverted to the lender’s “standard variable rate” (SVR). Assuming an interest-only mortgage of £250,000, that’s about £15,990 over two years.
When I called to ask for a new fixed rate, I was quoted a 2-year fixed rate of 3.39% plus a fee of £500. Assuming an interest-only mortgage of £250,000, that’s about £16,630 before the fee. I thought this sounded okay and frankly I felt too lazy to shop around. I called my husband to confirm that I was going to confirm the rate and as he trusts me he said fine and “have you looked anywhere else for a better deal?”
I hadn’t and although I didn’t feel like it I decided to do a quick, half-hearted search just to say I had. Within 15 minutes I saw a 2-year fixed rate deal at 3.09% with a fee of £1,000. Some quick maths told me that this deal would amount to a saving of just under £1,000 over a two year period.
3. Call your mortgage lender and bargain
The reason you call is because actually changing lenders is a bit of a hassle; a new lender will have to do a full due diligence on you whereas the existing lender already knows you, so if you can get the same deal where you are there will be far less work involved for you.
I called up my lender and told them the deal I had found. I was happy to pay the £1,000 fee for the saving of 0.30%. Being a reliable payer, my lender matched the rate of 3.09% and kept their fee at £500. Result!
Over the two year term that was a saving of about £1,500: enough to fund a brand spanking new iMac. I certainly wouldn’t sniff at that.
Two months after I had secured this deal news broke that mortgage rates were going up across the UK economy…I was more than a little glad that I hadn’t waited until mortgage maturity to act!
|Heather Katsonga-Woodward: On Business, Life & Everything In-Between||
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