Are you being overcharged? Fancy saving £332 per month?

When initially taking a mortgage, many homeowners choose to take a fixed rate or tracker rate that lasts for between 2-5 years.  When these rates end, in most cases the borrowing will transfer onto the lenders ‘Standard Variable Rate’ (SVR) and for most lenders, this means the rate charged will be between 3.74% to 5.74%.  

Dave Rees, our mortgage expert, reveals how you could save up to £332 per month on your mortgage.

Typically, the rate for Standard Variable Rates are higher than those that are available if taking a new mortgage, so for most people a significant saving can be made by shopping around for an alternative.  For example, a mortgage of £200,000 with 20 years remaining would cost £1,291pcm on a typical SVR of 4.74%.  However, assuming there was equity of at least 25%, a 2 year fixed rate could be obtained at 1.44% - this would cut monthly repayments to £959pcm(*).

Alternatively, a 5 year fixed rate could be obtained for 1.69% with a £749 fee that would cut payments to £982pcm (*)  A new lender will require the property value to be confirmed and a solicitor to be involved but the lenders offering these products (and many others) would pay these costs on behalf of the applicants.

Consideration should also be given to taking a new product with the current lender as in most cases, lenders will offer borrowers competitive options as an alternative to switching to the SVR and if no additional borrowing is required, this is usually a quick/simple process with little/no additional underwriting involved.

Ideally, these options should be considered 2-3 months before the current product ends, to help ensure if changing, that the new product can start as soon as the current product ends.  For advice and guidance on product options, please contact Dave Rees on 01225 775923 (Option 2) or 07932 469797 or email at dave@davereesmortgages.co.uk

(* Products quoted correct as of August 2017)

Savings Methods for Joining the Property Ladder

Helping the Children onto the Property Ladder

It’s common for youngsters to want a place to call their own, but getting to the first rung of the property ladder can seem out of reach for most. If you’re a parent, you probably feel a bit obligated to give them a financial boost. 

A number of schemes are out there that might be looking into to make getting your children into their own home – and out of yours – less of a stretch.

Help to Buy ISA

First-time homebuyers – those who have never owned property in or outside the UK – have an opportunity to save within a Help to Buy ISA. 

The account offers a tax-benefited way to set aside funds specifically for the mortgage completion deposit with the potential to gain up to a 25% bonus on savings from the Government. 

Account owners can save up to £200 on a monthly basis, with an initial deposit of up to £1200 in the first month.

Setting your kids up with a Help to Buy ISA lessens the financial blow of buying a home because the Government pays a bonus of up to £3,000 at the time the sale is complete. 

So long as your children aren’t purchasing a home that costs more than £250,000 (£450,000 in London), the extra cash is theirs for the taking. While a Help to Buy ISA scheme can be helpful for your as parents, there are some things to watch out for.

The tax-free bonus is only applied to the first £12,000 saved, and a minimum of £1,600 must have been put away to receive any bonus at all. Additionally, the bonus is not applied until mortgage completion, meaning funds cannot be used for an exchange deposit. 

The Help to Buy ISA must be held in cash, no investments, which means that due to low interest rates, you will only receive an interest rate of a couple of percent at best. 

It is also important to note that Help to Buy ISAs must be used for properties purchased with a mortgage, not cash, and there is currently no assistance for prospective homebuyers who wish to rent the purchased home. 

Account owners must also meet the following requirements: be a resident of the UK 16 years or older, and not have another active cash ISA established within the same tax year.

Savings and Investment Alternatives

In addition to the Help to Buy ISA, conventional savings and investment accounts can work to the make your children’s home buying dreams a reality. Regular savings accounts pay minimal interest but do allow for an easy way to shore up a mortgage or exchange deposit well before funds are needed. 

Importantly, some of these accounts have restrictions on how many withdrawals can be made in a given time frame, while others require funds to be locked in for a set period of time prior to opening.

Investments also offer a method to save toward home buying goals without the contribution limits tied to ISAs. And while some investments provide a higher rate of return than conventional savings or Help to Buy ISAs, the risk of loss of capital is real.

In order to get your children out of your home and into their own, your upfront financial assistance may be a necessary factor. Help to Buy ISAs are a smart way to earn a bonus on funds without the tax burden, but it's important to understand the limitations. 

Savings and investments also help towards reaching a certain amount of savings for a home purchase, but only when risk is balanced with potential reward. 

To successfully get your children onto the property ladder, consider which methods or combination of accounts fit your circumstances best.