Tag Archives: mortgage

Mortgage free: Britons urged to use ‘once in a lifetime’ chance to pay off their sum

A mortgage is one of the most substantial financial responsibilities a person will have in their lifetime, and often climbs into hundreds of thousands of pounds. The faster a person pays this off, then, the better, with many hoping to relieve themselves of this burden as soon as possible. Helping Britons to pursue this goal, experts have highlighted how the lockdown could propel borrowers towards paying off their mortgage sooner.

A boost in the UK’s savings during lockdown, it has been asserted by Halifax, could be the key to slashing thousands of pounds of interest and indeed, the term of a mortgage.

Additional lockdown cash could be put towards mortgage overpayments in what is being described as a “once in a lifetime financial opportunity”.

Halifax has reminded Britons that most mortgages allow some level of overpayment, either on an ad-hoc or regular basis, without a penalty being incurred.

However, it is estimated that fewer than half of mortgage payees are currently taking advantage of this feature.

READ MORE: Lloyds Bank: Britons urged to warn ‘elderly & vulnerable’ of scam text

Even if a person pays an extra £90 per month from the mortgage’s 10th anniversary, they could still save £5,300 in interest and cut 18 months off their term. 

If someone has managed to save during lockdown, putting this extra cash – some or all – towards a mortgage can make a significant difference.

For example, if a person puts down a £5,000 lump sum on a £100,000 loan with 15 years remaining, they could save £3,866 in interest and slash their term by 13 months.

Russell Galley, Managing Director at Halifax, commented on the matter.

He said: “The last year has been difficult, but there are all sorts of people for whom lockdown has brought financial benefits they may not have fully realised yet.

“Whether it’s a lump sum or a bit extra paid each month, overpayments could cut the cost of buying your home by tens of thousands of pounds and see you mortgage-free months, if not years, early.

“Not being able to take a holiday, not having the same travel expenses, or just not going out could mean some people have saved a sizeable amount.

“Some will want to splash out with a return to the shops or on that holiday, but for others lockdown may provide a once in a lifetime opportunity to significantly reduce their mortgage.”

Before making a mortgage overpayment, Britons are urged to check whether their mortgage will let them overpay.

Most have annual overpayment limits of 10 percent which, if exceeded, could trigger an additional feel.

Money Helper, a service backed by the Government, has urged Britons to time their overpayments correctly, in addition.

First, individuals should find out whether they are charged interest daily or annually.

If daily, borrowers will be able to overpay at any time, whereas if annually, the overpayment needs to be timed so it counts for the whole year. 

Read more
This post originally posted here Daily Express :: Finance Feed

Mortgage: How the ‘next generation’ arrangement popular in Europe could slash your costs

Mortgage payments are often the most significant financial burden a person can take on, and many will be hoping to slash costs as much as possible. While usual arrangements allow Britons to fix their mortgage rate for two or five years, there could be other options on the table. One of these is a long-term fixed rate mortgage, which people could fix in for 30 years or more.

“If people are to try to fix this for a longer period of time using savings, there is a mismatch where we know what the savings rate is today, but we don’t know where it will be in five years time.

“The only way to break the cycle is to change the funding model which can be done, for example, through our approach. Not funding using savings, but funding using  covered Bonds.

“With a covered Bond, people can set the fixed-term of that Bond to the mortgage, and that Bond will live on and on for the length of that mortgage.

“They’re very safe and secure and pretty low risk for the lender as they’re backed by the mortgages but also backed by the bank.”

However, Mr Bell also highlighted this is not a new approach to mortgages, and has been used in other markets before.

DON’T MISS
Furlough will change from this week – everything you need to know [INSIGHT]
Universal Credit: DWP calls for support for Britons on low pay [UPDATE]
WASPI: Britons call for ‘bridging pension’ to compensate 1950s women [EXPLAINED]

Denmark, he said, has used the long-term fix for hundreds of years since fires destroyed many properties, and people were looking for stability.

The option is also used in countries across Europe, including Germany and Holland.

The United States also has a very similar concept, with 80 percent of mortgages used in the country fixed for 30 years or more. 

But what is the driving force behind fixing a mortgage for a longer period of time?

Mr Bell continued: “The idea is that you can afford your mortgage today, but would you be able to afford it if rates went up to six or seven percent?

“A 30-year fix doesn’t have a Standard Variable Rate – which is usually a major concern for people – and it doesn’t have anything that is arbitrary or out of the control of Government.

“But it is important that there is a certain level of financial buffer there, although not as much as some more common lenders use.

“This has advantages, as it means people can borrow more, get on the property ladder earlier.

“It also helps people to buy the property they really want, rather than compromising. Many people often sell a home quicker because they want another room, a garden, more space to work from home. 

“The payments are fixed and locked in, but the products are flexible. So there are no long early repayment charges – we think five years for now, but tapering. These could change in the future.

“I like to describe it as letting the consumer decide when they want to remortgage, rather than forcing them.

“You choose when you want to remortgage when the time is right for you, or the market is right for you.”

Regardless of what option a person chooses, speaking to a mortgage broker is always considered a good course of action.

These individuals can offer a tailored and specialised approach to help people with their needs. 

Express.co.uk also spoke to Cassie Stephenson, who provided an additional perspective on long-term fixed products.

She said: “There is definitely a space in the market for these types of long term fixed products – it’s just a case of finding the right type of customer for the deal. It’s a move towards having personalised mortgages that are flexible depending on your circumstances.

“A benefit of having the same payment each month for the term of the mortgage is that it will allow easier budgeting and will remove the need to remortgage every few years when a fixed rate would normally end.

“However, it’s important to note that interest rates tend to be a lot higher when compared to typical two to five year fixed products as well as the set up fees alongside them. 

“Plus, if interest rates were to fall you could end up paying significantly more than with a more flexible option so it’s integral that customers fully understand the implications of these long term fixed options.

“Eligibility for these types of mortgage are also limited when compared to shorter fixed rates and if you’re planning on moving, paying off your mortgage in the next five to ten years they are unlikely to provide customers with the best deal.”

Author: Rebekah Evans
Read more here >>> Daily Express :: Finance Feed

Mortgage overpayments after lockdown may be 'shrewd move' but borrowers must 'be careful'

The series of coronavirus lockdown restrictions in the past year have meant major lifestyle changes. And while millions have sadly felt the financial impact of the Covid pandemic, some have fortunately found themselves making savings while being ordered to stay at home.

According to the Mental Health Report by digital financial coaching app Claro, created in partnership with Mental Health UK and The Money Charity, 20 percent of Britons used lockdown as an opportunity to improve their financial situation.

Meanwhile, research by financial services mutual Wesleyan found that savers have pocketed an average of £35 a month more during the pandemic, with average monthly savings increasing from £240.23 before the pandemic to £276 a month since.

Homeowners fortunate enough to have made accumulated savings during lockdown may wonder whether using this cash to reduce their mortgage term could be right for them.

It’s something which James Andrews, senior personal finance editor at www.money.co.uk recently discussed.

Speaking exclusively to Express.co.uk, he explained mortgage overpayments could be beneficial for some homeowners.

“Using any savings accumulated during lockdown to overpay on your mortgage can be a shrewd move for homeowners looking to clear their debt sooner,” Mr Andrews said.

“Overpaying on a mortgage can also save you thousands of pounds in interest charges.

“For example, a monthly overpayment of £200 on a £200,000 mortgage could save you £21,622 in interest.

DON’T MISS

“You would also clear your debt and be mortgage-free five years and 11 months quicker.

“This example is based on an interest rate of three percent, and a 25 year term.”

However, Mr Andrews did issue a warning when it comes to overpaying on a mortgage.

“There are a couple of points to be careful of, though,” he began.

“First, most lenders set a limit on how much you can overpay penalty-free – typically £500 a month or 10 percent of the total loan each year.

“Go above that amount and you could be hit with charges.

“Second, some mortgages also let you re-borrow money you overpay – meaning rather than being lost, money spent overpaying on your mortgage is effectively sitting in a savings account paying you the same interest as you’re being charged on your home loan.

“If yours doesn’t allow this, it’s wise to keep back some savings rather than put it all towards your mortgage.

“The last thing you want is an unexpected bill meaning you have to take out expensive credit, far outweighing the savings you make on your mortgage.”

For those unsure about whether it’s right for them, using an online mortgage overpayment calculator may help with the decision.

“In order to assess how your lockdown savings could help towards paying off your mortgage, money.co.uk has a mortgage overpayment calculator that can reveal how your term and interest payments could be reduced,” Mr Andrews said.

“Simply enter in details regarding your outstanding balance, remaining mortgage term, annual interest rate, whether you’d like to pay recurring or one-off overpayments (or both), and how much you’d like to overpay by.”

Author:
This post originally appeared on Daily Express :: Finance Feed

Homeowners urged to 'make wishes clear' to mortgage broker to get best green mortgage deal

Sustainability is understandably a key consideration for many people, with some opting to divest from unsustainable investments, while others are urging pension providers to focus on sustainability. Green mortgages are a term many homeowners and prospective buyers may well have heard of, but what does it mean?
“A ‘green’ mortgage is usually just a product that might be cheaper in some way than a ‘normal’ mortgage product,” Nick Morrey, Product Technical Manager at John Charcol explains.

“It could have a lower interest rate or a lower fee or (in the case of Nationwide) a bit of extra cashback.

“To qualify for such a product there is usually a set of criteria that often centres around what the EPC rating is for the property being lent on.”

Speaking exclusively to Express.co.uk, Mr Morrey continued: “It is a good thing that lenders are trying to reward people looking to buy more energy efficient properties but the system is somewhat flawed as the EPC ratings required tend to be A or B and the vast majority of residential properties in the UK are C or below.”

READ MORE: People aged 18 to 50 can get £1,000 bonus a year but some over 40 aren’t eligible

He added: “So unless people are looking at a relatively newly built property it is unlikely they would qualify.

“And the costs of retro-fitting the energy saving measures are often so high that the saving on the mortgage/energy bills means it isn’t likely to pay for itself for quite some time.”

So, what do green mortgages mean for buyers?

Nick Morrey, Product Technical Manager at John Charcol, said: “It depends on the actual deals on offer.

DON’T MISS

“Brokers are experienced in comparing and assessing which deals offer the best value over the initial product term but consumers might not find that so easy.

“It is quite possible that they could get a cheaper deal that is so much cheaper they could make a monthly contribution to a green cause that is bigger than a ‘green’ deal would have given them.

“So it pays to shop around or make your wishes clear to a broker who can recommend various options to aid the decision process.”

When getting a green mortgage, there are some things to check, however.

However, the mortgage expert said that overhands are “very unlikely nowadays”.

“Also, offering a ‘green’ mortgage doesn’t necessarily mean that a lender has a terrific carbon footprint,” he warned.

And, according to Mr Morrey, those failing to check this could be faced with an unpleasant discovery once they’re locked into a deal.

He explained: “It isn’t easy for a non-manufacturing business to be carbon-neutral but some lenders take more steps towards this than others and you might want a green deal but be borrowing from a lender with a poor approach to carbon neutrality, which you might not discover until you are tied in to them meaning they are profiting from your mortgage but not helping the planet at all.”

Author:
This post originally appeared on Daily Express :: Finance Feed