With UK interest rates rising to 5.25%. UK home owners are experiencing a significant rise in their monthly repayments. As interest rates rise it increases the incentive for homeowners to shop around and investigate whether they can get a better deal. There are various steps home owners can take to try and reduce the burden of monthly mortgage payments in both the short term and long term.
1. Investigate the possibilities of remortgaging your house. Remortgaging is the best way to save significant sums over the long term. Many mortgage lenders take advantage of borrower inertia. This mean many borrowers are unwilling to switch from the lenders SVR (Standard Variable Rate) The good news is that if you look around you will be able to benefit from their more attractive deals. It is necessary to take into account fees and costs of moving a mortgage but it in the long term it is worth investigating as the potential savings are significant. For example if you were on a SVR of 7% and had a mortgage of 150,000 an interest only mortgage would be 875 per month. If you were able to find a fixed rate mortgage deal of say 4.5% mortgage payments would fall to 562 interest only mortgages.
2. Fees for Remortgaging have tended to rise in the past year. This includes both arrangement fees and exit fees. So it is important to read the small print and make sure you get good advice. If a deal seems too good to be true there is likely to be a catch. Make sure you are not rushed into a deal by a pushy salesman.
3. If you have a volatile income consider the benefits of a flexible mortgage. If you have an inflow of money you can use it to pay off the capital of your mortgage and help to reduce interest payments however if you go through a difficult financial period you can reduce your monthly payments. However if your income is very stable the benefits of such a mortgage will not be felt.
4. For many homeowners one of the most worrying aspects of a mortgage is how changes in interest rates can seriously affect your monthly mortgage budget. This makes it difficult for homeowners to plan ahead with any confidence. If you feel that you are in this category you should look into a fixed rate mortgage over a period of 4 to 5 years. With interest rates rising at the moment fixed rate mortgages are going quite quickly. It is definitely worth shopping around for a mortgage with combines a good rate of interest with low fee.
5. If you have a current financial hardship;( perhaps there are school fees to pay,) it is worth considering Remortgaging to get a longer-term mortgage. In the past 25-year mortgages were considered the norm but with house prices rising well above the rate of inflation it is making interest payments more difficult. To make mortgages affordable for first time buyers lenders have been willing to offer longer mortgage terms for 40 or even 50 years. There is no reason why Remortgaging to a longer-term plan cannot be a good idea especially if your financial situation is likely to improve in 10 years time.
Related article:
http://phung5411.blogspot.com/2007/11/guide-to-reducing-burden-of-mortgage-in.html
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