Ways to reduce your Mortgage payments in the current mortgage climate

4 min
Important to know

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

With the rising living costs, the high inflation and the higher mortgage rates, many people are looking at ways to reduce their monthly mortgage costs. There are a number of things that you may be able to consider.

Make sure that you are not on the lender standard variable rate (SVR)

First, make sure that you are not on the lender’s standard variable rate (SVR), as this is usually a higher rate which your mortgage automatically converts to once your product deal term is up. For example, you might be on a 2 year fixed rate, and after this initial period expires, you would go on the lender higher SVR. It is a good idea to start looking for a better product deal 6 months before the expiry of your existing deal.

Consider interest-only or part-and-part

If you have savings, or are expecting an inheritance or a lump sum payment, or if you have sufficient equity left in your home, you may be eligible for an interest-only mortgage. You may only want to consider interest only for the short term, for example for a period of 2 years whilst you are on a new product deal, to help monthly payments to become more affordable, and then evert back to a full repayment mortgage after that period, hoping that the interest rates will be lower in the future.

You could also decide to have part of your mortgage on interest-only, and part of repayment (i.e. part-and-part).

Bear in mind that with an interest-only mortgage, you will only pay the interest, rather than reducing the actual loan balance.

If the mortgage is for your own residential property, this option should usually be the last resort as if you don’t have a repayment vehicle you may have to sell your property to pay off the loan at the end of the mortgage term.

Review the available mortgage term

You could look at extending the term of your mortgage which would lower your monthly payments, however you will be paying interest over the extra added years, and so you will end up paying more interest over the longer term of the mortgage. If you are thinking about this option, you may also want to remember to review this decision at a future date and shorten the mortgage term then if possible. For example, if in the future you are able to afford a higher monthly payment, or if the interest rates were to go down again, you could reduce the term again to save you overall interest costs.

Shop around

Always look for the available most cost effective mortgage deal, by looking at the whole of market. If you only go direct to one bank, you will only have access to their products, and thus you may not get the best deal available to you. If you are approaching a broker, check how many lenders they have on their panel and if they are truly independent. Your Mortgage Experts is a directly authorised firm and we are independent, so you can be assured that you get impartial advice.

Make use of your overpayment allowance if you have spare money

If you have savings, you could use them to overpay your mortgage. You can usually pay up to 10% of the mortgage amount without penalty fees. With an overpayment, you reduce the balance outstanding, and as a result you will reduce your monthly cost and your total interest payable. If you don’t wish to use your savings to pay the mortgage you could look for an offset mortgage instead. An offset mortgage is where your savings and mortgage accounts are linked and your savings offset the mortgage balance, so you pay less interest on your mortgage overall, whilst you still have full access to your savings when needed.

Check your loan-to-value (LTV) and the rates that apply to that LTV

Always check how much your Loan to Value is, for example if you have a mortgage left of £66,000, and your property is worth £100,000, it means your LTV is 66%. You would still need to go for a 70% LTV product, whereas if you over-paid £1500 towards the mortgage, you would get a 65% LTV product rate which is usually cheaper. LTVs bands are different depending on the mortgage lender, and you may want to compare with the help of a broker to review best available options.

Check your credit score regularly

Always monitor your credit score and look for ways for it to always be good (i.e. excellent), so that you don’t need to approach specialist lenders, who will usually charge a higher interest rate than high street lenders because you have a high risk profile

If you have already tried everything, but you are still struggling

If you are still struggling to make the regular full mortgage payments, speak to your mortgage lender and do not delay the conversation. Mortgage lenders have a duty to treat you fairly and help out as much as they can, before considering re-possessing your property. They may discuss with you a range of options, such as mortgage payment holidays, or repayments plans. Always remember that these are “last resort” options and they will also impact your credit score and ultimately your home can be at risk.

Would you like to discuss what may be best for your own personal circumstances?

Give us a call or drop us a line. We are happy to help. As independent mortgage brokers we have the knowledge and experience to review with confidence your situation and goals, help you make informed decisions, and ultimately provide sound and impartial mortgage advice.

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Luca Bertolino

Mortgage Expert

Your Mortgage Experts is led by Luca Bertolino with 20 years experience in financial services and in the property market. Through Luca’s wealth of knowledge and expertise, Your Mortgage Experts have become a trusted adviser that clients have come to rely upon for all their mortgage and protection needs.

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