Tips for Reducing Cost of Mortgages
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Our mortgage is the biggest monthly outgoing we face. Because it takes a high
% of our income it makes sense that we try hard to reduce our mortgage payments
as much as possible. There are two different aspects to reducing our mortgage.
The first is reducing our monthly payments and the other is reducing the total
cost over the life cycle of the mortgage. Often strategies to reduce our monthly
payments cause an increase in the total cost. This article focuses on the way to
reduce the total cost.
Here are some tips for reducing the cost of a mortgage
This is the most important piece of advice for any homeowner. Remortgaging to
the lowest rate can save £1000s each year. Most mortgage companies take
advantage of the fact that homeowners do not remortgage, but just stay on their
existing standard variable rate. However, even if you just ring up your mortgage
company and say you want to remortgage they may offer you a significantly lower
monthly payment. Therefore, always be aware of when your mortgage contract ends
and then search online and through other ways to find the cheapest deal. Note,
it may take a few hours, but given the stakes involved it will be time well
spent. Note, in a recent survey in the UK, it was found people spent longer on
researching a holiday than they did on researching a new mortgage deal. But, if
they spent more time on finding cheapest mortgage, they could probably have a
holiday for free!
Current Account Mortgage
A current account mortgage enables you to combine your mortgage into your
current savings account. This means that if you have significant savings in your
current account they will be automatically used to reduce the mortgage balance
and therefore, reduce your monthly repayments. As a further benefit you will not
pay any tax on your savings. If you are a high income tax earner this can be
quite significant. Current account mortgage also leads to less paperwork.
Tracker of Fixed
It is important to have an idea of whether you should get a fixed rate
mortgage or a tracker. A fixed rate is good if interest rates are forecast to
rise. But, a tracker is good if interest rates are falling. With a downturn in
the economy looming interest rates in the UK and US are likely to fall.
Therefore, a tracker mortgage provides an excellent way to make sure you benefit
from the falling interest rates.
Making Extra Payments
Making extra payments is the most effective way to reduce the total cost of a
mortgage because it save interest payments on the loan. If you can afford to
make extra monthly payment you will save interest and pay off your mortgage
About the Author
R.Pettinger is an Economics teacher at Oxford and writes frequently on the UK
economy and mortgages. He edits a site about Mortgages including a guide to
different types of mortgages.
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Article Published/Sorted/Amended on Scopulus 2008-02-22 11:57:12 in Economic Articles