Little-known mortgage trick that could save you money on your bills – here's what to do | The Sun
MILLIONS of households could be set to see their monthly mortgage repayments rise, but a little-known trick could save you cash.
The Bank of England is expected to hike interest rates higher than their current level of 4.5% later this month.
This could have a knock-on effect for any households with a tracker or variable mortgage rate.
But it's also a problem for borrowers coming to the end of their fixed-term mortgage deal too.
Around 2.2million borrowers are due to come to the end of a deal that they fixed when the base rate was at a historic low of 0.1%.
As interest rates go up, mortgage providers pull their cheapest deals.
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The choice of mortgage deals on the market has shrunk by more than 370 since the start of last week, according to finance data website Moneyfacts.
Plus, some other lenders have also recently made rate increases.
Moneyfacts said the average two-year fixed-rate mortgage on Monday last week was 5.34% but by Tuesday this week it had increased to 5.38%.
As a result, households could find their monthly repayment soar when you come to find a new one.
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But a little-known trick could save you a fortune.
Many homeowners don't realises that if you're coming to the end of a fixed rate, you can secure a new fixed rate up to six months in advance of when your existing deal is due to expire.
It means that homeowners can secure the best rates now, before interest rates go up.
But if you are a fixed-rate borrower, you may not know lenders often allow you to lock into a new rate up to six months before your current deal ends.
Many wait until their existing loan has run its course before signing up to a new offer.
David Hollingsworth, associate director at L&C mortgages, said borrowers may want to get ahead and lock in a new deal now.
He added: "Lender offers are valid for up to six months so it’s possible to secure a deal now, well in advance of the deal coming to an end.
"If rates do ease back then it’s still possible to review the deal but it at least secures a deal now if borrowers are worried about where rates could head from here."
The majority of homeowners choose a fixed rate mortgage because it gives you certainty over your monthly repayments for a set period, and protects you from interest rate rises.
Anyone with a variable or tracker mortgage rate will see their monthly repayments increase each time the Bank of England hikes rates.
That's a major problem for many households at the moment, who are already grappling with the soaring cost of living.
But locking in a decent mortgage rate can help to shore up your household finances.
How to get the best deal on your mortgage
If you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
But there are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you're remortgaging and your loan-to-value ratio has changed this could also give you access to better rates than before.
A change to your credit score or a better salary could also help you access better rates.
If you have a fixed rate, you could see higher rates when you come to the end of the current term after the BoE rate rises.
And if you're nearing the end of a fixed deal soon it's worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what's available.
You can also go to a mortgage broker who can compare for you, but you may have to pay for this service.
It could cost a couple of hundred pounds but it might save you thousands on your mortgage overall.
You'll also need to factor in fees for the mortgage, though some have no fees at all, or you can add it to the cost of the mortgage, but beware that means you'll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
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Remember, that you'll have to pass the lender's strict eligibility criteria too, which will include affordability checks, and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month's payslips, passports and bank statements
Do you have a money problem that needs sorting? Get in touch by emailing [email protected]
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