There has certainly been a lot of intense media coverage, debate and of course anxiety around the increased interest rates in the UK; with a rise further expected as inflation grips the UK.
If your current mortgage agreement is set to expire in the next year or so, you’ll need to be prepared to lock in the best rate for your subsequent product. Here are a few ideas about how can you save money on your mortgage rate to help you stay on top rate-rises and your finances.
It’s all about timing
It is worth getting started early to take advantage of lower interest rates before they begin to increase further. You can often move to a new mortgage product (possibly with a new lender) up to 6 months before your current rate expires by using the services of a skilled mortgage broker, as they can often find the best rates and deals for your particular situation. A “whole of market” advisor should be used because they are not beholden to any particular lenders.
Get your home valued
You might have made improvements to the home since you bought it or you might be fortunate enough to reside in a neighbourhood that has benefited from recent development. Invite a few estate agents over to appraise your home. This won’t cost you anything and might end up being really helpful. The amount of equity you hold may well have increased as a result of any appreciation in value. And, If your equity has increased, your loan to value (LTV) is lower and you may be able to secure an interest rate that is more attractive as a result.
Work on improving your credit score
Even if you currently have a good credit score, working to raise it can be considered a guarantee that you’ll be more likely to make your debt payments on time. Regularly reviewing your credit report and making sure any errors are corrected is one of the simplest ways to improve your credit score.
The bigger the deposit, the better
The more of a deposit you have, the less money you will need to borrow to purchase your first house. You’ll also be viewed as less of a credit risk by your mortgage lender and you’ll typically be offered a reduced interest rate as a result.
Those who put down 40% or more frequently receive the greatest offers from lenders. With a 20%–25% deposit, you can typically still get good offers. Interest rates can really start to seem high in tandem with smaller mortgage deposits (90 -95%). If you’re not in a rush to buy, it would be better to try to save for a larger deposit now, than risk being tied into higher payments later.
What about getting a mortgage after a debt management plan (DMP)?
It’s important to check your present credit score before applying for a mortgage. Your credit score will have been damaged by the missed payments that your DMP is flagging directly with your lenders or debt collectors. Your credit record will show that you have defaulted on these credit accounts and that you utilised a DMP to pay them off which will show for six years after the DMP was issued.
However, working to improve your credit rating is the single best way to improve your chances of getting a mortgage after a DMP.
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