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Most people will need to take out a mortgage to buy their first home and it’s probably going to cost you a lot. It will be one of the major parts of your budget throughout your working life and should be the first thing you look at when trying to save.
Not only are there many mortgage providers out there competing to offer the best rates but there are also actions you can take to lower the cost of your mortgage.
First time buyers
Interest only
Standard Variable Rate
Fixed
Tracker
Discount
Capped
Current Account
Re-mortgaging
Paying off your mortgage early vs. having savings?
If you’re buying a house for the first time it is important to find the best deal that suits you. Below are listed the mortgages available and how they could help you save money. Use our search engine to get the details of each deal offered by the mortgage providers here. Top
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If you’re a first time buyer looking to save money on your repayments so you can get on the property ladder, an interest only mortgage may be what you need. With an interest only mortgage for a set time (usually a few years) you will pay back the interest you owe on your loan. This can be a great way of saving money for the first few years of your mortgage. It is, however, only a short term plan. As soon as you can afford to make proper repayments you should do so, it will reduce the amount of time it will take you to repay the loan and the amount of interest you repay overall. Top
This is the standard rate on offer from your bank. It is a rate that can change monthly or yearly and is tied to the ‘base’ rate set by the Bank of England. If you are looking to save money you should look at this rate very skeptically. Chances are you’ll be paying more than you need to. Top
Whatever happens to the interest rate your rate will remain fixed on what you previously agreed to, but this only lasts for a few years. This is designed to insulate you from any increase in the interest rates, and if that happens you can make considerable savings. This rate also gives you stability to plan and manage your monthly budget. Top
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A tracker rate is similar to a standard variable rate except that it follows the base rate of the Bank of England exactly. Any drop in the rate and you benefit entirely but any rise and you pay for it entirely. This rate is a bit of a gamble and you have to be confident that the Bank of England will keep interest rates low. If you choose this rate and everything goes to plan then you could make a lot of savings. Top
A discount rate is usually an amount off of the standard variable rate for a limited amount of time. If you’re looking to save money through a discount rate than you should look at the mortgage providers SVR and by what percent they are offering to cut it by. 5% off an SVR of 10% leaves you paying 5% while 1% off an SVR of 5% leaves you paying only 4%.
Compare the rates of 95% of the market by using our search engine here. Top
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A capped rate is similar to an SVR and a fixed rate. Your rate will be variable but there will be an upper limit that it cannot go over. If you suspect the interest rates will soar this can be a great way to save money. A capped rate, however, usually comes with a ‘collar’ that stops the rate from falling below a certain point and that can cause you to lose money if the interest rate falls below it.Top
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This ties your savings account and your mortgage together. Allowing any savings you have to immediately repay your mortgage. If used correctly someone who earns more than they are spending each month is effectively overpaying on their mortgage potentially saving them thousands of pounds. Although you should be careful with your repayments as your interest rate will be higher than on a standard mortgage. Top
If you already own a home and have a mortgage for it you are not stuck with that deal. Switching mortgages or simply negotiating a better deal with your current provider can save you thousands.
The U.K. mortgage market is one of the most competitive in the world, why not take advantage of this and shop around for the best deal. Use our search engine to save yourself time and money. Top
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Paying off your debts is usually the wise move.
If you have both debts and savings you are probably over spending on a large scale. Your debts will almost always cost more than your savings are earning so paying off your debts with your savings will leave you better off.
Savings should first be used to pay off your more expensive debts, like credit cards. Once your most expensive debts are out of the way you can then decide if you want to use your savings to pay off your mortgage.
When making this decision you should look at how long you have left to pay repayments on your mortgage, how much in interest you will be charged and how much interest your savings are earning in the bank. If the interest your savings are earning is a lesser amount than the interest you are being charged than you should seriously consider paying off your mortgage.
This, however, doesn’t apply to ISA’s. If you have an ISA, every year you are allowed to save 3,000GBP in a tax free savings account. This means that, because the interest isn’t taxed, you earn an equal amount or more than your mortgage costs.Top
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