Time for that self-service mortgage?

Term reduction has become a key aspiration for mortgage holders, with almost three quarters wanting to reduce their mortgage term or increase their payments to reduce the balance over time, according to research featured in Intelligent Finance's 'End of Term' report.

Its publication coincides with the launch of a new self-service product the firm claims could save mortgage holders tens of thousands of pounds in interest. When questioned, more than half of mortgage holders expressed an interest in a self-service mortgage facility.

Nearly a third of people say paying off their mortgage or monthly mortgage repayment is their biggest financial concern. The appetite for more flexibility is clearly strong, with almost half of all borrowers believing their current mortgage arrangements are restrictive.

If given the choice, nearly three quarters of people would reduce their mortgage term or increase their mortgage payments to reduce the balance over time. One in five would welcome the ability to lower the amount on their regular mortgage payment.

At last, according to the report, people seem to be looking at their mortgages holistically rather than being seduced by headline rates. Six in ten mortgage holders are fully aware of the total cost of their mortgage over its full term, almost double the amount from just 18 months ago.

With an offset mortgage you could reduce the amount of interest you pay on your mortgage. Instead of receiving interest on your savings, ISA and current account, you pay none on the equivalent amount on your mortgage. To that end, Intelligent Finance has enhanced its offset mortgage with a self-selecting offering. Customers can now select their preference of shorter term, lower payments or reduced debt and Intelligent Finance will then ensure it happens automatically.

For example, a mortgage customer with a 25 year old 90% LTV offset tracker mortgage, borrowing £250,000 on a repayment basis against a property worth £290,000, with £10,000 in savings, £3,000 monthly salary paid into a current account and £50 a month additional savings, would have the following choices:

Shorter Term: reduce the balance on your mortgage balance faster, and possibly repay your mortgage earlier - save £44,737.19 in interest and shave 2 years and 4 months off the term

Lower Payments: make your monthly payments as low as possible - save £25,615.80 in interest.

Reduced Debt: reduce the amount you owe without affecting the term of your mortgage - save £34,828.70 in interest.

30 March 2007 © Moneyextra.com

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