It's now more important to overpay your mortgage than ever before.
Overpaying your mortgage now could lead to a better deal next time you remortgage.
With the Bank of England base rate down to just 2%, many borrowers on tracker and standard variable rate mortgages will now be enjoying lower monthly repayments.
If you can afford to, you may already be making the same monthly mortgage repayments before the reductions of the last 3 months. This means you can overpay your mortgage without actually spending any extra money every month.
Overpayments allow you to do two things: clears your mortgage early, and save interest charges.
Overpaying is a good solution right now.
We all know the dreaded credit crunch has played utter havoc with the mortgage market. A couple of years ago, a 10% deposit or equity stake in your home would have been more than sufficient to secure a decent mortgage deal.
But these days the most competitive home loans are reserved for borrowers with a 40% deposit That’s one reason why it’s so important to get your loan-to-value (LTV) -- which is your mortgage loan as a percentage of the value of your home -- as low as possible. And the quickest way to do that is to pay your mortgage down as quickly as you can by overpaying.
Borrowers with a 60% LTV -- in other words, those who have a 40% equity stake -- could pay an average rate of 4.75%. This is 0.34% lower than the deals available at 75% LTV, and a whopping 1.67% lower than the average rate on offer to borrowers with just 90% LTV.
Having a 60% LTV is a good position for any borrower to be in. However, a 61% LTV normally puts borrowers up into the next category, making interest rates more costly, even though the difference in equity is just 1%.
When you next come to remortgage, you’ll put yourself in the best possible position for a competitive mortgage deal if you manage to get your LTV down. But the trouble is, as house prices continue to fall, reaching that all-important low LTV is becoming increasingly difficult.
According to research by Savills Estate Agents for The Sunday Times, even people who bought homes ten years ago could see the level of equity in their properties slump dramatically by 2010. These homeowners currently have 51% equity, but Savills reckons this could drop to just 25% (or a 75% LTV). If Savills are right, when these borrowers next come to remortgage, the best deals will no longer be in reach.
Indeed, brokers say the average LTV for borrowers who have remortgaged in the last three months is 51%. Right now these homeowners should be able to access the best mortgage deals, but it could be a very different story if house prices do indeed fall significantly by 2010.
So that’s why I think it’s really important to overpay your mortgage if you can. This will help you to combat reducing house prices and reach a lower LTV.
Even if you haven’t just had the benefit of an interest rate cut, it still makes sense for all homeowners to overpay. After all -- credit crunch or not -- the sooner you become mortgage-free, the better!
If you want to discuss your options, you can either telephone me on 08458 386938, or email me using the link above.
With the Bank of England base rate down to just 2%, many borrowers on tracker and standard variable rate mortgages will now be enjoying lower monthly repayments.
If you can afford to, you may already be making the same monthly mortgage repayments before the reductions of the last 3 months. This means you can overpay your mortgage without actually spending any extra money every month.
Overpayments allow you to do two things: clears your mortgage early, and save interest charges.
Overpaying is a good solution right now.
We all know the dreaded credit crunch has played utter havoc with the mortgage market. A couple of years ago, a 10% deposit or equity stake in your home would have been more than sufficient to secure a decent mortgage deal.
But these days the most competitive home loans are reserved for borrowers with a 40% deposit That’s one reason why it’s so important to get your loan-to-value (LTV) -- which is your mortgage loan as a percentage of the value of your home -- as low as possible. And the quickest way to do that is to pay your mortgage down as quickly as you can by overpaying.
Borrowers with a 60% LTV -- in other words, those who have a 40% equity stake -- could pay an average rate of 4.75%. This is 0.34% lower than the deals available at 75% LTV, and a whopping 1.67% lower than the average rate on offer to borrowers with just 90% LTV.
Having a 60% LTV is a good position for any borrower to be in. However, a 61% LTV normally puts borrowers up into the next category, making interest rates more costly, even though the difference in equity is just 1%.
When you next come to remortgage, you’ll put yourself in the best possible position for a competitive mortgage deal if you manage to get your LTV down. But the trouble is, as house prices continue to fall, reaching that all-important low LTV is becoming increasingly difficult.
According to research by Savills Estate Agents for The Sunday Times, even people who bought homes ten years ago could see the level of equity in their properties slump dramatically by 2010. These homeowners currently have 51% equity, but Savills reckons this could drop to just 25% (or a 75% LTV). If Savills are right, when these borrowers next come to remortgage, the best deals will no longer be in reach.
Indeed, brokers say the average LTV for borrowers who have remortgaged in the last three months is 51%. Right now these homeowners should be able to access the best mortgage deals, but it could be a very different story if house prices do indeed fall significantly by 2010.
So that’s why I think it’s really important to overpay your mortgage if you can. This will help you to combat reducing house prices and reach a lower LTV.
Even if you haven’t just had the benefit of an interest rate cut, it still makes sense for all homeowners to overpay. After all -- credit crunch or not -- the sooner you become mortgage-free, the better!
If you want to discuss your options, you can either telephone me on 08458 386938, or email me using the link above.
Labels: bank of england, interest rates, remortgage
posted by Des Tourick 1st Call 4 Mortgages at
15:06
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