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Tips to pay off your mortgage faster
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3. Constantly look for the lowest interest rate
The lower the interest rate the more your payments will reduce the capital, so it’s essential to have a competitively priced deal. But which product is best suited to repaying your mortgage early?
The number of homeowners on standard variable rate mortgages (SVR) is set to rise by 500,000 this year because the credit crisis has made fixed-rate and tracker deals too expensive.
It’s never cost-effective to pay the SVR with any lender, says Louise Cuming from Moneysupermarket.com.
The average SVR among lenders is currently between 7% and 7.5%, well above the best fixed-rate and tracker mortgage offers.
“Make sure you switch mortgages at the end of a deal and never end up on an SVR,” says Cuming.
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Keeping track
If you don’t think you’ll be bothered regularly switching, or are worried about the fees that can be involved when starting a new mortgage or even closing one, it may be a good idea to look at the long-term tracker rates.
This is especially sensible given that the Bank of England’s base rate is expected to fall further than the current 5%, and the Government is pressuring the main banks to pass these cuts on to customers.
Tracker deals guarantee a rate below the SVR, don’t have any early redemption charges and offer full overpayment flexibility.
Some more of the best tracker mortgages are First Direct with 5.34% on an LTV of 90%, and Northern Bank charging 5.4% with and LTV of 75% or 5.41% with an LTV of 80%.
Beware of arrangement fees, which are increasing. Although they can be added to the mortgage balance when you’re doing the sums, increasing the mortgage balance works against the objective of repaying a mortgage early.
Make sure you compare the different products available on a “true cost” basis, including all the fees to make sure you are comparing like with like.
