Published On: Mon, Nov 25th, 2019

Martin Lewis money saving expert reveals how to save thousands on your mortgage | Personal Finance | Finance


Martin Lewis, money saving expert, appeared on This Morning to discuss mortgages today. He urged homeowners to switch mortgage now, as they could save thousands of pounds by doing so.

So what do you need to know to find your cheapest deal? Martin had three top tips to follow.

1) First check how much your current mortgage costs and is it about to end?

If you’re remortgaging (ie, switching to save), it’s good to understand how your current deal works to see if it’s worth switching. If buying a home, it’s also important to know the following about your prospective deal to help compare:

  • What’s the rate? Plus monthly payments and outstanding debt.
  • What type is it? Fix, tracker, discount, SVR (the rate – usually much higher – most fixes and trackers revert to after an intro deal ends).

  • When’s the intro deal over? Eg, when does the 2yr fix end exactly?

  • How long’s the full mortgage term? When must it be fully repaid? Eg, in 10, 15, 25 years.

  • Will I be penalised? Any early repayment/exit penalties?

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Critically, work out your current loan to value (LTV) – the proportion of your property’s CURRENT value you’re borrowing. Eg, £90k on a £100k property is 90 percent LTV. Generally, for each five percent your LTV drops, usually until 60 percent, the cheaper the deal.

So if your home’s increased in value, since you got your mortgage, you may gain. Or if you’ve savings that you can use to reduce the amount you’re borrowing, that can help too.

2) Benchmark your cheapest deal with a mortgage comparison

If your rate’s about to end, ask your existing lender what its best deals are. These can have low fees as you’re not switching between lenders, so don’t need to pay costly fees – and it can set a benchmark for what to beat.

Otherwise, for an easy benchmark of what’s available in your circumstances, start with a comparison site that includes all deals, including ‘direct only’, those that aren’t offered by a broker. These include Martin’s ‘Mortgage Comparison’ or sites such as MoneyFacts.co.uk.

Don’t just focus on rate though, the smaller your mortgage, the bigger the impact of fees. A good way to compare mortgages is to divide the fee across the discount or fixed period. So a £1,200 fee on a two-year (ie, 24-month) deal is £50 a month – then add that to the monthly repayment.

Which should people go for – a fix or variable rate?

The advantage of a fix is you get price and budgeting certainty that the rate won’t move for a set time. Whereas variable deals move with the UK interest rate (and sometimes just at the provider’s whim). Generally you pay a little more to fix, but not much.

Ask yourself how much you think rates will rise over the period. If safety’s what is important for you, err on the side of fixing, and fixing for longer – and right now with fixed deals being outrageously cheap, and there being a lot of uncertainty out there, this is a good time to look at it.

And if you can get a long fix for not much more than a short one, that also gives you a level of certainty.



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