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Heading into 2023, you may be looking for ways to cut back on spending. One way to do this is by saving money on your mortgage.
Here we share some of the best ways of how you can save money on your mortgage in the new year.
Do your research
It can be time-consuming to shop around for a mortgage but taking your time to compare and contrast interest rates is one of the best things you can do to save money on your mortgage in 2023. You should be looking for the lowest interest rate based on how much you want to borrow and the length of time you are looking to borrow. Taking time to shop around and choose carefully can save you a great deal of money in the long term – sometimes as much as a 1% rate discount – especially if you have a good credit rating.
Getting a head start on this can save you further money still. Whether you are wanting to renew an existing mortgage, or take out a new one entirely, financial institutions typically give you a three-month window which gives you time to shop around. With some of these institutions, they may also allow you to benefit from a better rate.
Pay back your mortgage over a shorter time period
When considering the best ways to repay your debt, you could consider the time frame. The faster you are able to repay your mortgage, the less interest you will pay in the long-run.
This has the potential to save you a great deal of money on your mortgage. For example, choosing to pay back a £200,000 mortgage over 20 years, instead of the standard 25 years, could save you around £25,250 in interest (assuming an interest rate of 4%).
In addition to these calculations, you will also need to consider whether it is cost-effective to pay your mortgage over a shorter period. For this, you will need to consider both the value of money over time, and look into the terms and conditions to see if you will need to pay an early repayment fee if you decide to do this after already taking out a mortgage.
Round up your monthly mortgage payment
If you pay a mortgage payment of £481 every fortnight, why not consider rounding up to paying £500 twice a month instead? For those that are able to do so, this is a great way to save money on mortgage interest in the long run. By increasing your monthly payments just slightly, you are working towards paying off your mortgage more quickly. This small action can reduce the number of years it takes you to repay your mortgage and result in thousands of pounds saved – just on interest.
Try to make lump sum payments
If you are trying to save money on your mortgage in the new year, a good way to do this is to try and make lump-sum payments. For example, if you have a mortgage of £200,000 with an average annual interest rate of 4%, planning to repay over a period of 26 years, you could be saving money on interest. For example, making a prepayment of £1,000 could save you an additional £1,657 in interest across the entire loan term. Obviously, the more you are able to pay, the more money you can save in the long run.
Refinance your mortgage
It could work out more cost effective to refinance your mortgage – this means taking out a new loan in order to pay off your outstanding balance. Once you have done this, you could have lower monthly payments which can save you a lot of money in the future. This could also be a good chance to change your loan terms or secure a lower interest rate.