5 simple ways to prepare for your next mortgage
21st March 2019
It’s spring, a time when many home owners might feel inclined to get their house affairs in order after the long winter.
This annual ritual of cleaning and sorting is no longer synonymous with just being a household chore. It’s also a great time to take hold of your finances and organise your accounts and payments for the months ahead!
1. Review your credit history
Before applying for a mortgage, check your credit report carefully. Small oversights can be the difference between a successful application and being turned down.
Are you registered on the electoral roll? Have you closed credit card accounts you no longer use? Both can have a negative impact on your credit rating so it’s good practice to check and act early.
2. Create a budget planner
Reviewing your income and outgoings to help you plan for your future financial goals and understand what you want to accomplish with the money you save.
This will be extremely useful if you’re hoping to buy your first home or move to a larger home in the future, so you can always keep that goal in mind.
3. Consider making overpayments
Some lenders will let you ‘overpay’ your monthly mortgage repayments. This helps reduce the outstanding mortgage balance, allowing you to pay off your mortgage earlier or reduce the total amount of interest you’ll pay in total.
Whether you already own a home or you’re in the process of buying one, it’s worth considering making overpayments on your mortgage (now or in future).
Be sure to check with your current or future lender about how much you’re allowed to overpay, since there’s usually a limit before a penalty applies.
4. Renovate your home
Okay, this one isn’t exactly ‘simple’ but home improvements could potentially increase the value of your home, which in turn increases the amount of equity you have in the property.
This can be good when it comes to remortgage, as lenders generally offer more competitive deals as your ‘loan-to-value’ ratio decreases. This could also make your home more attractive to potential buyers in the future should you decide to sell.
5. Monitor your mortgage
When the initial period of a mortgage ends - say, at the end of a two-year fixed deal - lenders usually transfer customers onto their Standard Variable Rate (SVR). This typically has a higher rate of interest, potentially adding an extra £2,500 in extra interest payments a year (learn why).
It’s important to stay on top of your end date so you can switch to a new deal before lapsing onto the SVR. Put a note in your diary, or use a free mortgage monitoring service to alert you when it’s time to switch.