Many people dream of owning a house, but the cost of building is usually very expensive. Therefore, many people resort to mortgage financing to be able to purchase a home without much stress. Mortgage providers provide their clients with capital to own a home at an agreed interest rate within an agreed time, usually 25 years for loan repayment. However, mortgages usually arrive with their terms and conditions. Lenders are entitled to repossess the house and sell it back to get their money when clients default on loan repayments. Because no one wants to lose their home there various ways to reduce mortgage payments and properly maintaining a house is one of them. This will significantly reduce insurance costs and expenses associated with mortgage financing.
According to real estate agents, properly maintaining a house or property includes trimming trees, mowing lawns, checking gutters and roofing, good plumbing, and fresh paint in and out of the house. Maintenance is specific to properties and should be done regularly to ensure the property is in good condition. In addition to maintaining a house for inspection, a homeowner has to understand the different insurance covers tied to property maintenance to reduce mortgage and insurance repayments. First, a client will have to understand the costs associated with building insurance. Building insurance is the expenses incurred for repairing damaged structures in homes, including baths, roofs, toilets, kitchens, windows, and walls. Generally, building insurance covers claims caused by subsidence, vandalism, fire, natural disasters, and fallen trees amongst other calamities (Aikman, 2021). The chosen policy often determines the cost of building insurance and consequently affects the final mortgage value assigned to a home. For instance, when homeowners combine numerous risks insured, then the insurance policy becomes extremely expensive. Many clients cover their homes against natural disasters that are rare in the UK and these insurance policies are rather exorbitant and make clients incur more extra costs in their mortgage repayment plans. Many times clients are advised to revisit their building insurance policy's terms and conditions and enroll for covers that are only relevant to their geographical contexts.
Furthermore, mortgage financiers usually discuss the building insurance costs before entering into a mortgage deal with their respective clients. Should a client default a loan, the lender will be using building insurance to ensure the house is in perfect condition for re-sell. Homeowners are usually advised to enroll for a sum insured policy that calculates the costs for renovating a home afresh. The concept is convenient as it ensures the homeowner is only paying for the cover he needs. In the UK, 5% of clients adopt an index-linked policy to ensure their house gets the rightful insurance policies that enhance better maintenance. Thus, when clients ensure their house is in good condition they gain better bargaining power for affordable building insurance rates with time.
Alternatively, clients will be saving expenses in mortgage evaluation fees when they properly maintain their homes. In the UK, mortgage evaluation fees can cost up to £200-300 for one evaluation occurrence (Cost of Buying, 2021). The fees are much higher when evaluators conduct regular assessments because the owner tends to damage home property frequently. Most lenders deem the mortgage evaluation fees essential as they assess the property conditions before assigning the mortgage value. The analysts come up with their upscale fee depending on the property's current value. Therefore, one could be saving much in mortgage evaluation fees when they ensure the house is consistently in good condition.
Furthermore, clients should use the 1 % thumb rule to ensure that they allocate enough finances to maintain their house value. The rule suggests that if a house is worth $250,000 then the house owner should allocate $2500 annually for house maintenance, repairs, and upkeep. Likewise, maintaining the house in perfect condition overcomes additional costs charged by lenders in depreciating assets. Data from UK banks dealing with mortgages exhibit that budgeting for house maintenance subsequently reduces building insurance and mortgage expenses by 5%. Hence, older properties require a higher thumb rule percentage (2% to 4% recommended) to keep pace with a property value. As a home-owned property depreciates based on structure maintenance, mortgage repayments may slightly increase.
In conclusion, clients may reduce their mortgage repayments by about 3% - 5% per month by exercising high maintenance and increasing property value through equity. Even though data on this subject remains quite limited, existing evidence indicates proper house maintenance increases a house value and subsequently reduces mortgage repayments across UK lenders. Good house maintenance reduces the need for mortgage evaluation fees charged for property value assessment. Likewise, proper house maintenance reduces building insurance costs charged for damaged property. Eventually, the property value, in the long run, ends up higher than the mortgage value, subsequently reducing payments. All the clients that were successful in reducing loan repayments were mostly homeowners in small towns who have a good rapport with local mortgage providers and banks. So for most UK citizens, the option is not viable as a sure way of reducing mortgage payments. Hence evaluating methods such as; refinancing to a lower rate, applying for mortgage forbearance, or refinancing for a longer term is a sure and proven way of reducing mortgage costs.