For most of us a property is the biggest investment we’ll ever make and the costs of keeping your property can be significant. However if you want to maximise the value you gain from your investment there are number of ways you can ensure that your property doesn’t become a drain and ensure that it works to maximise your wealth.
Falling out with your rate
Mortgage repayments can put significant pressure on a family’s finances so it’s crucial to ensure that you aren’t paying more than you have to. Research shows seventy five per cent of the population don’t know how much a one per cent difference in the rate of interest they pay on their mortgage would make over the course of a year. The average figure was estimated at a staggering £800.
Between now and August 2008, forty to sixty thousand households are due to come off their fixed rate mortgage deals meaning that they may have to pay their lenders’ Standard Variable Rate (SVR) as a result. This could see many households who are currently paying around five per cent interest on their loans having to fork out significant amounts to meet rates of eight per cent or more.
A date in the diary
If you’re on a fixed rate mortgage deal like most people, then it’s important to put a date in the diary and to mark when it’s going to expire. It’s possible to line up a new mortgage in advance of the expiry date, this way you’ll avoid making any repayments at the SVR rate. Contact your mortgage provider in advance of this date and find out what sort of a deal they’re prepared to offer you. Remember it doesn’t pay to be too loyal. If you think that the deal your lender has offered you is uncompetitive then shop around.
A cash injection
If cash is in short supply then your house can also be used as an asset to borrow money against. Secured loans are not for everyone as it is possible that you could lose your house if you fail to make repayments.
However, if you think that your finances could do with an injection of cash, either to consolidate debts or to invest, perhaps in your property, then there are good reasons to consider a secured loan rather than a personal unsecured loan.
Most of the lowest interest loan deals available are on secured loans rather than unsecured. A £10,000 personal loan from Egg to be repaid over four years for example, will come with an APR of 9.9% making your monthly repayments £253.
The same secured loan from Firstplus comes with an APR of 6.3% meaning that your monthly repayments will come to £236. Over the four years, opting for the secured loan would save you £816, so if you are aware of the risks and feel confident about your ability to repay the opting for the secured loan makes sense.
Thrash out the threshold
Sometimes it costs more to borrow less. This may sound odd but because small loans get paid off quicker lenders make them more expensive to make more of a profit. This could mean that you’re better off borrowing a bit more. Research from MoneyExpert.com has found that the average APR on a £3,000 loan is 14.9% while the APR on a £12,500 is 8.78%. So it’s worth factoring this in when trying to work out how much to borrow.
On the ladder
Getting on the property ladder can be an expensive business, and it doesn’t necessarily get any cheaper once you’re there. However, if you stay informed about how mortgages work you should be able to stay one step ahead of the game when it comes to paying off your loan. Your house is also a significant asset, and if you should need cash don’t be afraid to secure loans against it. However be informed about the risks of doing this.