Author: Hannah Craig

A variable-rate mortgage is a type of loan where the interest rate can change over time. This means your monthly payments may fluctuate based on the lender’s policies or economic conditions, often influenced by the Bank of England’s base rate. Many borrowers hope to see rates decrease, which can lead to lower monthly payments!

Here are some common types of variable-rate mortgages:

– Tracker Mortgages: These follow the Bank of England’s base rate. Whenever the base rate changes, your mortgage rate will change as well! Tracker mortgages typically have a fixed term, after which they may switch to the lender’s standard variable rate (SVR).

– Standard Variable Rate (SVR): This is set by your lender and can change independently of the base rate. SVRs are usually a bit pricier, and you typically move to this rate once your fixed-rate or tracker mortgage period is over.

– Lifetime Tracker Mortgages: As long as your mortgage lasts, these loans follow the base rate, often with minimal or no early repayment fees.

What’s Great About Variable-Rate Mortgages? They often come with lower rates and fees compared to fixed-rate loans, giving you more flexibility and the chance to enjoy reduced payments when interest rates go down.

Keep in Mind. The flip side is that variable rates can be unpredictable. If interest rates rise, your monthly payments might increase, which can be a bit stressful for your budget.

Before diving into any variable-rate product, it’s a good idea to think about how a potential rate increase might affect your budget. A chat with a mortgage adviser can really help you explore options that strike the right balance between flexibility and affordability.

If you’re on a Standard Variable Rate (SVR), you might enjoy the freedom to switch without penalties, but keep in mind that SVRs can add up in cost.

If you’re interested in chatting with a friendly, qualified adviser, just give us a call at 0800 211 8700. We can search the whole of market on your behalf to find a great deal for you.

Overpaying your mortgage means making monthly payments that exceed what is required. This strategy can help you save on interest and pay off your mortgage more quickly.

Choosing to make these extra payments can provide a significant boost to your financial situation. Here’s why:

1. Reducing your debt from buying a home helps you become mortgage-free sooner. Ensure your overpayments shorten the loan term instead of just lowering monthly payments.
2. You won’t pay interest on overpaid amounts, which can lead to greater savings compared to potential earnings from a savings account.

The three things you MUST check first
There are a few important things you should consider first…

Check 1: Do you have other, expensive debts? If so, clear those first

When dealing with debt, prioritise paying off the debts with the highest interest rates first. This way, you stop the interest from piling up quickly, which helps you save money and pay everything off faster. So, focus on those high-interest credit cards and loans before you think about paying extra on your mortgage—those tend to cost you more in the long run.

Check 2: Can you overpay without penalties? Most can overpay 10% each year, but if you’re not careful, you risk thousands of pounds in fees.

How much you can overpay on your mortgage depends on the type of deal you have:

• Fixed Rate Mortgage: Most lenders allow you to make overpayments of up to 10% of your mortgage balance each year without incurring any penalties.
• Standard Variable Rate (SVR) and Some Tracker Mortgages: You can usually make an overpayment of any amount, but if you have a tracker mortgage, check the specific terms as they may vary. Note that Standard Variable Rates (SVRs) can be expensive, so if you’re on one, consider remortgaging to save money instead of relying solely on overpayments.

If your lender allows overpayments, check the maximum limit and any fees for exceeding it.

Check 3: Do you have a sufficient emergency fund?

Having an emergency fund is important for those who are debt-free, apart from a mortgage. Overpaying on your mortgage ties up cash, which might cause issues if something unexpected happens.

Figuring out if you should overpay your mortgage isn’t always easy.

First, think about whether it’s better to put extra cash toward your mortgage or stash it away in savings. If your mortgage rate is the same or higher than what you’re earning in savings, then overpaying is a smart move.

But just because your savings rate is higher doesn’t mean you should skip overpaying. It depends on how you plan to pay (lump sum or monthly), how much you owe, how long you have left on your mortgage, and whether you’ll be taxed on your savings interest.

If you’d like to discuss your options, our expert advisers are here to help.
Contact us below or reach out to us at 0800 211 8700.

The information contained within was correct at the point of publication but may be subject to change.
Your home may be repossessed if you do not keep up repayments on your mortgage.