Ways to reduce your mortgage repayments.

By John Cossons, Mortgage & Protection Designer

First of all, what type of mortgage do you have?

If you have a fixed-rate mortgage.

Even if interest rates change, your monthly mortgage repayments won’t be affected if you have a fixed-rate mortgage – they’ll stay the same until the end of the fixed-rate period. However, you’ll need to think about what to do when this period ends. If you don’t arrange another deal, you will be moved onto the lender’s standard variable rate (SVR), which could see your monthly payments go up.

It’s important to understand what your current rate is, and when it’s due to end so that you can prepare to switch your rate or remortgage before the fixed-rate period finishes. 

If you have a tracker mortgage

A tracker mortgage is a variable rate mortgage usually linked to the Bank of England base rate. A change in the Bank of England base rate will affect the amount of interest you pay, and your tracker mortgage payments.

Changing to a new mortgage deal, such as a fixed-rate mortgage, could give you stability over a set period – where your payments will stay the same each month. 

If you’re on a standard variable rate (SVR)

The SVR is the rate of interest that’s usually charged once a fixed rate or tracker period ends. The SVR is set by your mortgage lender – it’s not directly affected by any changes to the Bank of England base rate. However, the SVR is variable and can change, which means your monthly payments could go up or down.

If you’re on an SVR, you could be paying more than you need to, and it may not be the best option for you to stay on this for a long time.

Ways you could reduce your monthly mortgage payments-

Reduce or cancel any mortgage overpayments

If you already pay more towards your mortgage, and you’re starting to feel the pinch – you may consider reducing or cancelling your regular overpayments for a while. You’ll still need to make your monthly payments on your mortgage, but it may help make it easier to manage your bills.

Alternatively, if you happen to have savings available, you could consider using some of these to make a lump sum overpayment and reduce your ongoing monthly mortgage payment. 

Switch your mortgage rate

You can switch mortgage rates with your current lender, at any time, however, If you choose to switch before your current rate ends, you will need to find out what your early repayment charge (ERC) would be. This can help you decide if moving to a better deal early is worthwhile, and whether the money you might save outweighs any costs.

Most people with a fixed-rate mortgage wait until their current deal comes to an end to switch. The good news is that lenders don’t need to check your eligibility or credit score for you to switch rates with them.

Remortgage

You could also remortgage to a different lender to find a more preferable interest rate, which could reduce your monthly repayments. You can remortgage anytime but, to avoid potential ERCs, people tend to consider remortgaging towards the end of their existing mortgage rate. Any new mortgage offer is usually valid for a maximum of six months.

There may also be costs involved when moving your mortgage to a new lender. To help you decide if it’s worthwhile, we can calculate your new mortgage repayments and see if the benefits of remortgaging outweigh any costs. 

Pay back your mortgage over a longer period

You may be able to extend your mortgage term. This can reduce your monthly payments and make it easier for you to manage your outgoings. Depending on your needs, this could be agreed upon without any assessment of your circumstances.

Keep in mind – if you increase your mortgage term, it can take you longer to pay off the mortgage, and you’ll pay more interest overall.

As your circumstances improve, you may want to reduce your mortgage term, or make overpayments, to reduce the size of your mortgage and the amount of interest you pay.

Increasing your mortgage to repay other financial commitments

If you have equity in your home, you may be able to borrow against it, in the form of a home loan to repay other lending. This might help you reduce and more comfortably manage your outgoings. You don’t need to wait for your current deal to end before you can apply for this, but borrowing more against your home, especially to repay other debts, needs careful thought.

With any form of borrowing, you need to be able to afford the repayments. You should consider how much you want to borrow, how long you need to pay it back and your current financial situation. The value of your property can also fall, which can leave you in negative equity, where you could owe more than your home is worth.

Some borrowing options will be more suitable for you than others. For example, repaying your debts with an unsecured loan might be more appropriate.

How Anstee & Co can help you with your mortgage repayments

If you are considering your mortgage repayment options but are unsure about how they may impact your financial future, we can help. We at Anstee & Co. are Independent Mortgage Brokers, which means that the financial advice we offer is unbiased.

The initial meeting is at our cost, so why not contact us today? A meeting can be arranged at a time and location that is convenient for you.

Our expertise covers all aspects of financial planning including pensions, investments and protection.

If you have any thoughts on this article, “Ways to reduce your mortgage repayments”, then we would love to hear from you.

Finally, the information contained in this article is for information purposes only and does not constitute financial advice. Anstee & Co. is authorised and regulated by the Financial Conduct Authority (FCA).

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.