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Halloween is here – a time for ghosts, witches and embarrassing costumes.
Vampires and zombies might give you the heebie-jeebies, but there’s something even more terrifying than things that go bump in the night: making a mistake with your mortgage.
Seemingly small mistakes could set you back thousands of pounds and haunt you in the years ahead.
So, to prevent you from doing something you’ll live to regret, here are three of the most monstrous mortgage mistakes to avoid.
1. Automatically taking a deal with your existing lender
When your current mortgage deal is coming to an end, your lender might contact you with a new deal. Many people simply accept this deal without shopping around, however, you could potentially save thousands of pounds by switching to another lender.
Mortgages are usually very large, so reducing your interest rate by just 0.5% could make a significant difference to how much you pay overall.
Let’s imagine you have a £200,000 repayment mortgage with 20 years left on the loan. If your lender puts you on a Standard Variable Rate of 3.6%, your monthly repayments would be £1,170, according to the Which? online repayment calculator. If you switched to a deal with a 2% rate, your repayments would reduce to £1,012 – that’s a £158 saving every month.
Shopping around could save you even more money if the value of your home has increased. The higher the value of your home, the lower your ‘loan-to-value’ – the ratio of mortgage to property value. Lenders reserve the lowest interest rates for people with the lowest loan-to-values because they represent a lower risk.
Another way of reducing your loan-to-value, and accessing better rates, is to put extra cash into your property, for example, a bonus or inheritance. Most lenders only let you make mortgage overpayments of 10% before they charge a fee. But, when you remortgage, you could use your extra cash to increase the size of your deposit, thereby reducing your loan-to-value and securing a better rate.
2. Overlooking insurance
Once you’ve secured a mortgage, it’s extremely important to ensure you’ll be able to make repayments should the worst happen. If you die or become too ill to work, your family could suffer crippling financial hardship and lose their home.
If you’re not sure whether you have protection, chances are you don’t. Research by MoneySuperMarket shows 60% of the British population doesn’t have life insurance, despite many of those providing financial support to loved ones. The survey found property buyers spend an average of 11 months without life insurance before getting insured.
There are three main protection products to consider:
- Life insurance pays out a lump sum of money to your beneficiaries when you die
- Critical illness cover provides you with a lump sum of money if you become seriously ill
- Income protection insurance pays you a regular income if you can’t work because of illness or injury.
It isn’t a pleasant subject to think about, however, planning ahead will give you the peace of mind that you and your family’s finances are protected against the unexpected.
3. Not getting financial advice
Shopping around for a mortgage and ensuring you have the right insurance in place aren’t easy tasks. This is where a financial adviser can help.
We will search thousands of mortgage deals to find one that suits your needs and circumstances. We have access to a much wider range of options than if you were to search directly on lenders’ websites or on comparison sites.
A 2019 survey by Legal & General shows people who take financial advice benefit from better deals, thereby saving them money and securing the right mortgage for their circumstances. The research found more than a quarter (29%) of people who took advice had switched their mortgage in the last five years compared with only one in five (19%) of those who went direct.
The survey also found seven in 10 borrowers (69%) who went direct when switching stayed with their current lender, versus 57% of those who took advice. “An adviser’s mortgage search would have covered thousands more mortgages across the market,” the research paper states.
Once we’ve found a mortgage for you, we’ll do the application for you and handle all the paperwork, ensuring everything is filled in accurately and promptly.
We can also advise you on the right protection insurance solutions, so you can rest safe in the knowledge that you’re protected against life’s ‘what ifs?’.
In a nutshell, we’ll take the stress and hassle out of remortgaging, so you can focus on your life, work and family.
Get in touch
If you want to discuss your mortgage, protection or wider financial needs, please don’t hesitate to get in touch. Email office@verve-financial.com or give us a call on 0330 320 5048.
Please note
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
