Avoid The Trap Of Overpayment

You may need a mortgage for decades but you don’t necessarily have to stay on the same mortgage for all that time.  In fact, you should make periodic checks to determine whether or not you’re still on the best deal.  If you’re not, you should move as quickly as possible.  Here is a brief guide to help.

Plan ahead

This is probably the single most important tip of all.  When you sign up for a mortgage you will be told when your initial deal ends.  That basically gives you a deadline to work towards.  Be sure to allow yourself ample time to do thorough research before your current deal ends.  Remember to allow extra time for holiday periods such as Christmas.

Keep your credit rating in good order

There are all kinds of reasons why this is important.  Maximising your options for remortgaging is just one of them.  At a minimum, try to avoid putting yourself in a situation where you’re going to have to repair damage to your credit rating.  Where possible, take proactive steps to boost it.  For example, make sure that you’re on the electoral register at your current address.

Check your credit record for errors before you start applying for new mortgages.  Do this well in advance so you have plenty of time to get mistakes corrected.  Remember, a lot of businesses (and organisations) are probably going to be working through the backlog of COVID19 for quite some time to come.

If you know your credit rating has taken a hit, possibly due to COVID19, then commit to seeing a mortgage broker.  They may be able to find you a deal you wouldn’t have been able to access yourself.  In any case, you have nothing to lose by trying – and potentially a lot to gain.

Aim to minimise your LTV ratio

The LTV ratio (or loan-to-vehicle ratio) describes the value of your loan as compared to the value of your home.  This is where remortgages can have a massive advantage over regular mortgages.  If you’ve been in your current home for a while, you’ll have paid off some of your mortgage.  There’s also a decent chance that your home will have increased in value.

This means that even if you haven’t been able to make savings over the last year or so, you could still be an attractive prospect to a lender.  If you have been able to make savings, you might want to consider putting them towards reducing your mortgage.

You would have to move carefully here.  If you leave yourself short of savings, you could end up having to take out consumer credit.  This could leave you worse off than if you’d just paid extra on your mortgage.  On the other hand, if you can reduce your mortgage principal and maintain a decent “cash cushion” you could save yourself a lot of money.

Speak to your current lender

Never just assume that your current lender will offer you the best deal on your remortgage.  At the same time, never just rule them out either.  Find out what they can offer you so that you can compare it with your other options.

Check-in with a mortgage broker

It is literally a mortgage broker’s job to know the mortgage market inside out.  Even if you’re a highly desirable customer, using a mortgage broker can save you a lot of time.  If you know that you have hurdles to overcome, then a mortgage broker can help move them out of your way.

In particular, if you’ve seen your credit rating and/or finances damaged by COVID19 definitely speak to a mortgage broker about your options.  They may still be able to find you a much better deal than your lender’s Standard Variable Rate.

For more information, please get in touch

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