For those of you with low mortgage interest rates, now is the time to start paying more off the mortgage to reduce debt and risk. In fact, this approach is now being recommended by the Council of Mortgage Lenders.

Reducing your mortgage has several advantages. Firstly, you can repay your mortgage over a shorter term, meaning you are debt free sooner and will save yourself thousands of pounds in interest.

With house prices falling, loan to values are falling as well. By repaying debt you are helping manage the LTV multiple. This is particularly important if you need to remortgage as the number of deals available are limited.

Also, whilst falling interest rates are good for borrowers they are bad news for savers. So you have to think what else would you do with the money and if the rate of return is low, then reducing debt is worthwhile.

Finally, lowering your debt reduces risk. The recession is likely to continue during 2009, so it’s wise to repay mortgages should you be made redundant. Of course in this situation repaying a mortgage must be balanced with having sufficient cash to live on until a new job is found.

Tags: Debt, LTV, Mortgages, overpay

This entry was posted on Saturday, January 17th, 2009 at 6:41 am and is filed under Mortgages. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.