Top 5 things to sort out when it comes to your mortgage, according to John Charcol:
1. Is your Fixed/ Tracker/ Discount/ Capped rate due to expire this year?
Check your mortgage offer or call your lender: If you are due to fall onto the lender’s Standard Variable Rate this year put a note into your diary 3 months before the end date to speak to your Mortgage Broker or Financial Advisor so that you can avoid paying more than you need to. Resolve to take an interest in financial matters this year, particularly Bank of England Rate changes. Your mortgage is normally the largest and most important financial commitment that you have, so changes in the economy will affect you personally.
2. Reduce the term of your mortgage or consolidate debt… or both
A small regular overpayment can substantially reduce your mortgage term and total interest. On a £100,000 repayment mortgage, increasing your monthly payments by just £100 a month would bring a 15 year term down to 12 years and 8 months. If you feel your mortgage is a big factor in deciding when you can retire, you should seriously consider this.
Review your debt situation and set yourself a real budget for each month. Get rid of any credit cards that you may have a tendency to over-use. Move credit card debt to a lower unsecured rate, or get advice on consolidating with your mortgage. In order to make the most out of raising the funds from your mortgage, you should not reduce your monthly payment, just redirect it towards the mortgage so that you are paying off the same debt but quicker. Most mortgage providers now allow overpayments of 10% per year so use this to clear down a good amount of debt in a year. Work out the monthly payments with interest and set yourself the challenge of clearing what was the credit card balance in one year.
3. Did you give up smoking or lose excess weight last year?
If so congratulations! If you initially took your mortgage protection, life assurance, income protection or critical illness policy on smoker’s terms and have completed 12 months without smoking, or if your policy was rated for a “low height to weight” ratio and you have completed 6 months in a ‘normal’ weight banding, your provider may now be able to offer you a better premium. However, if you are offered a new critical illness policy look thoroughly at the lists of what illnesses are covered and make sure that you are not cutting the comprehensiveness of your cover by opting for a lower price.
If these are your goals for this year: Best of luck. You will find that the health benefits far outweigh the financial ones.
4. Have you changed job this year?
If you or your partner has now stopped working or have changed to part time or you have had children you should review what cover you now have and the possible consequences of the death or illness of one of you. Understand what your employer provides for Death in Service Benefit, sick pay or Income Protection or Permanent health Insurance (PHI). If your sick pay allowance or Death in Service has changed then your Income Protection or PHI deferment needs to be changed to match and your life assurance may fall short.
5. Buildings insurance
This, like car insurance, should be reviewed annually anyway. Your existing mortgage provider or bank may offer loyalty deals.
