If you have a low-rate mortgage you may well be bracing yourself for the interest rate shock that is to come when your deal ends. Sonya Matharu of The Mortgage Mum explains how you can take advantage your situation to put you in better position when you remortgage
If you are currently sitting on a mortgage rate which starts with a 1,2 or 3, you have a golden rate.
With the recent fluctuations in interest rates, you may be counting your lucky stars, glad you locked it in before the market got sassy.
But for many, the end of that fixed rate term is fast approaching, so here’s how to ensure you’re making the most of your current rate, preparing for your remortgage.
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Analyse your outgoings
When remortgaging the chances are – thanks to the current market conditions – you’re going to end up with a higher interest rate. In turn, this will increase your monthly payments.
This is why, before you get to that point, it’s important to analyse your outgoings to determine your available funds and if needed, see what you can do to increase this.
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Prioritise your debts
If you have high-interest debts, like credit card balances or personal loans, consider paying them off first.
This can yield more immediate financial benefits and free up more disposable funds whilst also enhancing your affordability and the options available to you, for your remortgage.
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Strategically overpay
The amount you’ll be able to overpay will vary depending on your product, but the majority of mortgage products allow you to make overpayments of up to 10% of the overall balance without incurring an early repayment charge. Check with your lender to be sure.
For an extra boost, consider directing a percentage of your gifts, bonuses or additional savings towards overpayments to reduce the overall balance and the amount you’d be paying on interest.
But exercise caution and refrain from putting all your eggs in one basket – you don’t want to tie up all your available funds in your home, leaving you vulnerable in case of unexpected expenses.
If you can consistently allocate additional funds each month towards your mortgage, you’ll leverage your lower interest rate to pay down more of the principal balance.
This practice will also acclimatise you to a higher monthly payment.
Consequently, when it’s time to consider a remortgage, and your new committed monthly payment potentially increases, it might closely resemble what you’ve already been accustomed to with the overpayments.
Gradually reducing the principal balance also means the loan required for your remortgage will be lower, which could provide you with a distinct advantage and more available options.
Taking control…
By implementing one or all of these strategies, you’ll gain a sense of financial confidence and control, optimising your current financial situation.
A proactive approach will enhance your sense of control when your remortgage is due.
Streamlining your expenditures and reducing debt will boost your financial stability, improving your affordability and expanding your pool of lender options, allowing you to choose the best-suited option when the time comes.
If you are planning to move home rather than remortgage, my colleague Gemma Bennett, has written a similar piece explaining how you can reap the benefits of your current low rate when you buy your new home. Click here to read it.
Sonya Matharu is a senior mortgage broker for The Mortgage Mum
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Connect with The Mortgage Mum team
You can connect with Sonya via her website www.sonyamatharu.com and you can contact Gemma via email Gemma@themortgagemum.co.uk: or at her website, here.
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https://www.linkedin.com/in/sonya-matharu-349265182/
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