After all that festive spending, the New Year is the ideal time to review your finances and look at ways you might be able to save money in 2020.
Your mortgage is likely to be your biggest expense, so it’s a great place to start if you’re looking to reduce your monthly bills. Here’s our rundown of five mortgage resolutions you might want to consider making.
1) Cut costs by remortgaging
Do you know how much interest you’re currently paying on your mortgage?
If you don’t, or you think you may be sitting on your lender’s Standard Variable Rate (SVR), the chances are you’ll be able to cut your costs by remortgaging to a cheaper deal.
Before you do this, check whether your mortgage has any Early Repayment Charges (ERCs). If you’re paying the SVR, you’ll usually be able to switch without penalty.
There’s a huge range of mortgages to choose from, so if you’re not sure which one to go for, or just need help understanding the different options, it’s a good idea to seek expert advice from a mortgage broker. They’ll be able to talk you through the various choices, and help you pick the best deal based on your individual circumstances.
Bear in mind that there can be costs involved in remortgaging, such as conveyancing and mortgage arrangement fees, although the overall savings you’ll make could far outweigh these. Many remortgage deals also come with financial incentives such as help with legal fees, cashback, or a free property valuation.
2) Consider a fixed rate mortgage if you’re worried about rising interest rates
It’s impossible for anyone to know which way interest rates will move next, but if you’re worried about how you’d cope with steeper mortgage payments if rates go up, you may want to consider locking into a fixed rate deal.
These can provide valuable peace of mind that your payments won’t change if rates do rise. The good news is that fixed mortgage rates are currently exceptionally low, and you can lock in for as long as 10 or even 15 years if you want to.
Bear in mind that if you choose a longer-term fix, you’ll need to be confident your circumstances won’t change. Although most deals are portable if you move during the fixed rate term, you’ll need to meet your lender’s affordability criteria before you can move your mortgage to a new property.
3) Overpay your mortgage if you can afford to
Overpaying your mortgage by even a little bit each month can substantially reduce the amount of interest you’ll pay back overall and could also shorten your mortgage term so that you end up debt-free sooner.
Most lenders will allow you to pay back up to 10% of your mortgage balance each year without penalty but it’s a good idea to check with yours to see if there are any restrictions on overpayments.
Take a look at our mortgage overpayment calculator here
4) Review any Buy to Let mortgages
If you own a property you let out, make sure you review your Buy to Let mortgage so that you can keep costs to a minimum.
Lowering mortgage outgoings is likely to be a priority for all landlords in 2020, particularly given the gradual reduction of mortgage interest tax relief. From April of this year, the amount of tax relief landlords can get on finance costs for residential property will be restricted to the basic rate of tax.
5) Build a property deposit
If you’re hoping to get onto the property ladder in 2020, your mortgage resolution may be to build a deposit. You may be able to boost the amount you save by taking advantage of government schemes.
For example, if you save into a Lifetime ISA, the government will top up any payments you make by 25%. That means for every £200 you contribute, you’ll receive an additional £50.
The Lifetime ISA is available to anyone aged from 18 up to 40 who wants to buy their first home or save for retirement, or both. You can save up to £4,000 into a LISA each year and your savings can be used to buy a first home costing up to £450,000 anywhere in the UK.
What are YOUR 2020 mortgage resolutions?