Are you paying too much interest on your mortgage? If you didn’t take out a new product when the last one came to an end, you could be left thousands of pounds out of pocket, research from Which? suggests.
Once the introductory term of your mortgage is over, it’s likely you’ll be moved on to a Standard Variable Rate (SVR) automatically, unless you take out a new product. But SVRs are rarely competitive and, in many cases, the benefits don’t outweigh the drawbacks.
Despite this, 25% of homeowners have an SVR mortgage, according to the research. The higher interest rates these homeowners are paying could mean they’re handing over thousands more than necessary each year.
However, the Which? survey found many mortgage payers are unaware of what they’re paying. And, therefore, how much they could save:
- Just 27% know their exact mortgage rate
- 41% know an approximate rate
- 33% don’t know their rate
On a mortgage amount of £208,279 over a 25-year term, Which? calculates that a homeowner could end up paying as much as £347 a month more by paying an SVR; over £4,000 annually. Of course, when purchasing a home with a larger mortgage or over a longer term, the extra, avoidable monthly payments are even more.
With this in mind, why aren’t the thousands of people on SVRs switching?
- 50% are happy with their deal
- 17% don’t think switching is worth the hassle
- 41% would be unlikely to switch if they came across a cheaper deal
Securing a better deal on your mortgage can improve your financial security both now and in the long term. If you’re currently on an SVR or are approaching the end of your current mortgage product, these tips can help you find the right deal.
1. Get your paperwork and finances in order
Much like when you took out your original mortgage product, you’ll need to prove you’re able to make payments again. This means handing over paperwork, such as payslips and bank statements, to potential lenders.
Getting the paperwork in order helps to speed the process up. It also gives you a chance to demonstrate how your situation has changed. A pay rise could mean you’re able to shorten the length of your mortgage or give you a higher level of disposable income, which can make you more attractive to providers.
2. Check your credit score
Again, your credit score plays an important role in accessing competitive rates. Hopefully, you’ve maintained a ‘good’ credit score since you first purchased your home and have now demonstrated that you can meet the regular monthly payments.
However, if there are any negative factors or inaccuracies listed on your report, you should take steps to remedy these before you apply. A lower credit rating may have a direct effect on the interest rate you’re offered and even whether your application is accepted.
3. Reassess product needs
The last time around, a fixed-rate interest product might have been right for you. But changes in your personal circumstances and the wider economy may mean that’s no longer the case. Don’t assume that the last product type you took out will still be the best option.
Take some time to decide what you need from a product before you move on to searching the market.
4. Search the lending market
Don’t rely on your current lender to offer you a deal that’s competitive. There are hundreds of lenders available on the market and a bit of research could save you a considerable amount.
Searching the lending market can seem daunting due to its size. This is an area that we can help you with. With our mortgage expertise and knowledge of different providers, we’ll help you find the one that’s right for your situation.
5. Calculate your property’s value and current loan
Generally, the more equity you hold in your home the better the interest rate you can secure. As a result, it’s important to firstly value your property and then get a clear figure about how much you still owe on your mortgage.
If your property’s value has increased, you may have fallen into a lower loan to value (LTV) band, giving you access to lower interest rates.
6. Look at other features too
The most competitive deal for you isn’t necessarily the one with the lowest interest rate. Looking at other key features that are important to you can help you find a product that matches your plans. Depending on your priorities, fees, overpayment options and payment holidays can make a mortgage deal more attractive, and, ultimately, mean paying less.
7. Work with an independent mortgage specialist
Working with a mortgage broker can improve the chances of your application being accepted. We understand the criteria of different lenders and what they’re looking for. We’ll take the time to understand your priorities when looking to remortgage and help you take the steps to secure the right product for you.
If you’re planning on remortgaging, whether you’re on a SVR or your current product is coming to an end, please contact us today.