Mortgage payments can be a large part of our monthly outgoings so if you’re looking to free up your cash flow, it’s a good place to start. How you do this depends on your circumstances so we’ve listed 6 ways you could reduce your mortgage payments each month.
Speak to a mortgage adviser if you’re not sure what option is best for you. Before you make any changes to your payments, make sure you agree them first with your mortgage provider.
Don’t stay on the Standard Variable Rate (SVR)
When you come to the end of a mortgage deal, you will automatically be put onto the SVR by your mortgage provider, unless you arrange a new deal. The SVR is usually higher than a new deal rate and according to Experian, mortgage holders could save £5,000 by switching to a new fixed rate offer.
Switch to a cheaper deal
Even if you avoided the SVR and got yourself a deal, it’s still worth comparing rates to see if you could save money by switching, especially if the value of your home has increased. When working out if you can save, don’t forget to account for any extra costs such as Early Repayment Charges (ERC’s), valuation or product fees. But if the new deal is good enough, you could save money every month.Guide to remortgaging
Increase the term you’ll pay over
The longer you take to pay off your mortgage, the less your payments are each month. However, you will end up paying more interest overall if you hold the loan for longer. If you can afford to pay more later on, you may be able to reduce your term again but any changes will need to be agreed with your mortgage provider.
Consider an interest only mortgage
As the name suggests, with this type of mortgage you only pay the interest charged on the loan amount each month. It means your monthly payments will be cheaper, but you won’t be paying down the amount you borrowed. At the end of the term, you’ll still owe the full loan amount so you need to consider how you’ll pay this when the time comes.
Consider an offset mortgage
An offset mortgage is a way of linking your mortgage with your savings. Instead of earning interest on your savings, it reduces the amount of interest charged on your mortgage. So the more savings you have, the less interest you pay. You still have access to your savings but if you dip into them, your mortgage payments will go up again. Some providers will even let you link up friends or family savings too so they can help you out but still keep hold of their own savings.
Pay more now so you can pay less in the future
Paying more may sound a bit odd for a list like this, but it’s all about planning. If you know you want to pay less in future, taking action now will help. You may be thinking ahead to maternity/paternity leave, or wanting to go part-time at work before retirement. By paying more now, either as a lump sum or regular payment, you can reduce the amount you need to pay in future. You may have an overpayment limit on your mortgage product so make sure you speak to your mortgage provider first and let them know what you plan to do.
If you’re struggling to pay your mortgage it’s important to speak to your mortgage provider straight away. They will be able to support you.
We hope you found this guide helpful. If you’re interested in more money saving tips, check out our ‘7 tips to help save money at home’.