Do your mortgage errors cost you thousands?

Thousands of mortgage holders all over the country are throwing money away each month by making easy-to-avoid mortgage mistakes.

With interest rates going up twice in quick succession to 5% and many commentators predicting further rises, it could be time for you to review your mortgage arrangements. To start with why not check to see if you are making any of my five most costly mortgage howlers.

Not only could you save yourself thousands of pounds a year but you could also pay off your mortgage years earlier than you planned.

Mortgage Howler #1: Standard Variable Rate rip-off
Mortgage lenders charge you interest on the money you borrowed at a so-called Standard Variable Rate (SVR). This rate is normally 1.5-2.5% higher than Base Rate. This makes most mortgages very bad value especially when compared to best new deals on offer today.

If you are stuck on a rate that is too high you should switch your mortgage to a better deal. Look at the impact of a switch from an SVR of 6.75% to a three year fixed rate of 4.89% like the one available from the Yorkshire Building Society on our Best Buy tables.

Mortgage type	Monthly payment	Interest over three years	You save
SVR at 6.75%	£563	£20,250	Nothing
New 4.89% 3-year fix	£408	£14,670	£5,580

Figures relate to a £100,000 interest-only mortgage over 25 years.

So, if you think an extra £5,580 over three years is worth having, arrange a free telephone review of your mortgage from L&C by filling in this simple form. London and Country is a specialist mortgage broker able to advise you whether a switch will save you money given your individual circumstances.

Mortgage Howler #2: Not overpaying when you can
There is no reason you can’t pay your mortgage off early. Many lenders now allow overpayments up to a certain limit e.g. 10% of the balance a year. This works for flexible interest-only mortgages as well as for repayment deals. Take the example shown in the table above.

If you kept your monthly payment at £563, instead of reducing it to £408 after re-mortgaging, you would be paying off an extra £155 a month cutting the amount you owe instead of just paying off the interest.

Over three years your extra £155 a month adds up to £5,580 off your mortgage loan of £100,000. So after three years of overpaying you will only owe £94,420. Assuming you then re-mortgage again to another three-year deal at 4.89% your minimum monthly payments would come down to £385.

Carry on paying off £563 a month and your debt is cut by £178 a month - that is a further £6,408 over three years. After six years of overpayment you would owe £88,012 instead of £100,000! Keep repeating the process and you can see that you could be out from under your mortgage nice and early.

Mortgage Howler #3: Not using a mortgage broker
It amazes me that so many people just accept the poor value deals offered by high street banks. You should ALWAYS consult an independent no-fee mortgage broker before making a final decision on any mortgage. They will search the available deals on your behalf and recommend the best deal for you. We get all our mortgage best buys from L&C mortgage brokers - EveryInvestor staff (myself included) use their excellent independent service to find our personal mortgages.

Mortgage Howler #4: Buying MPPI from a bank
This is a terrible trap to fall into. Mortgage Payment Protection Insurance (MPPI) can be very useful for some people but it most high street banks and lenders rip their customer off incredibly badly with this product. We recommend Burgesses as the cheapest payment protection providers around. Never take out a policy without comparing our best buy provider with any quote you have been given. We reckon you could save £136 a year with our best buy.

Mortgage Howler #5: Buying other insurance from banks
You should also never buy any buildings or contents insurance from a high street bank or other lender without first comparing their quotes to our best buy providers. Once again the high street is full of pickpockets and many of them wear name badges, shiny suits and work in banks. Avoid the scams - check before you renew and save as much as £181.