Mortgages: Britons warned of ‘silly mistakes’ which leave them ‘paying thousands more’

On his Youtube channel, James Shack, chartered wealth manager, urged people to do “everything they can” to get the best rates available. He explained the biggest mortgage mistakes he sees his clients make that “leave them paying thousands more than they need to”.

He said: “Mortgages are an extremely useful tool when used correctly but I often see clients making silly mistakes that cost them thousands.”

With mortgage rates on the rise, it can be detrimental to leave new fixes to the last minute.

Britons should understand the Loan-to-Value (LTV) of their properties or it could really cost them.

LTV means the proportion of debt being borrowed against the value of the property.

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So a 75 percent LTV means a 75 percent loan and 25 percent equity in the property. The higher the LTV, the higher rate that people pay.

He explained that a client bought a property for £600,000, with a £540,000 repayment mortgage. This is at 90 percent LTV and they had this on a two year fix term.

Their fix is coming to an end and they are looking to find a five year fix and the best available deal they can find is 3.55 percent.

As his clients were making repayments for the past two years, their LTV had fallen to 85.33 percent.

However if they can bring their LTV down to 85 percent, they could access a lower repayment rate of 3.35 percent.

To get the LTV down to 85 percent, the client would need an upfront payment of £1,991.

Mr Shack said: “This may sound like a lot but if they did so they would make a net saving of £3,248 over the next five years of their fixed term.

“By investing £1,991 now, they are getting a guaranteed 263 percent return over five years.”

Mortgage rates tend to take a step up at every five percent LTV interval so people get the same rates between 75 and 80, 85 and 90 percent.

Sometimes the differences of rates are vast so Mr Shack stressed the importance of Britons checking their LTV before they remortgage, to see if they can drop to the lower percentage.

“It is so important to check,” he added.

Mr Shack continued: “There’s another sneaky way you can get a lower LTV.

“Typical lenders will only do an evaluation when you first apply for a mortgage with them or when you do work to it.

“So when you’re remortgaging, they instead value your house in line with an internal index with houses in your area.

“Your broker can tell you how your current lender is valuing your property and if you think the index they use is higher than the property, then you’ve lucked out.

“Your current lender could offer you a better rate than you will get elsewhere.”

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