If you pay rent, are you paying too much? Have you checked that you are being charged a fair rent compared with similar properties in the neighbourhood? Or are you renting accommodation that is larger than you really need? Many people find themselves in this situation, especially after a relationship break-up or a friend moving out. Would downsizing help you to cut your monthly rent bill? Some people rent a home with an extra bedroom just so they can offer friends a room to sleep in when they visit. If this is you, move to a smaller place and give your friends a sofa bed in the lounge instead! Alternatively, why not let out that room? Remember the first £81.73 a week on that room is tax-free, but don’t forget to ask your landlord’s permission before you sublet. What about the location of your home? Are you renting in a very expensive area? If so, could you move to a less expensive area and save money?
If you have a mortgage, do you know what its current interest rate is? And how do mortgage interest rates work? Your mortgage may have been the best deal when you first took it out, but new and better deals come on to the market all the time. You may be able to save yourself a lot of money by asking your lender for a better rate or by switching to another lender. Shop around with at least three independent financial advisers until you find the best deal. Even though many financial advisers have access to the same products, in my experience they hardly ever seem to come up with the same ones. You can find independent financial advisers through many sources, such as the internet or estate agents, or through personal recommendation. Make sure you check the credentials of potential financial advisers thoroughly before you go ahead. Most estate agents have a financial adviser who will be happy to advise you, and the internet is full of brokers just waiting for the chance to give you a mortgage quotation.
Some websites offer online mortgage calculators. For example, if you want to borrow £80,000 and would like to find out how much it will cost per month, try logging on to the UK Mortgage Calculator on www.scientific.force9.co.uk/mortgage.htm and it will work it out for you. Alternatively, surf the net for other calculators – you’ll have plenty of choice. However, remember that the point of this exercise is to reduce and eventually clear all your debt, so don’t be tempted to remortgage for more money than you absolutely need.
Remember also to check the terms of your current mortgage: are there any early redemption penalties or other tie-ins? You may find, for instance, that you are tied into your mortgage arrangement for a certain number of years, and that if you pay off some or all of the loan before that time is up, you will incur a penalty of around three to six months’ worth of instalments. This alone could amount to several thousand pounds. However, if you do find that there is a tie-in on your mortgage, all may not be lost. Your broker may still be able to find a deal that will save you money even after taking the redemption penalty into account.
