Five ways to cut your mortgage payments
Rising energy and food prices are becoming a growing concern for countless households right now, particularly as the tax burden looks set to increase too. So as the cost of living in the UK continues to head upwards, many of us will be looking at where we can make savings and free up some extra money.
Mortgage payments are a good place to start, as many of us could be on a much better rate or a cheaper deal. Of course, the mortgage market is complex, with countless different options open to you. So, it’s well worth speaking with a mortgage broker with expertise in this area, who can guide you through this maze and point you in the right direction.
Don’t stay on a standard variable rate when your deal expires
You’ll automatically be moved onto a Standard Variable Rate (SVR) when your mortgage deal comes to an end. This is usually higher than the rate you can get with a new deal, so if you switch to a new fixed rate offer, you could potentially save thousands of pounds on your mortgage payments.
Look for cheaper deals
Even if you’ve managed to avoid being moved onto an SVR, there’s still more you can do to cut your mortgage payments, such as shopping around for cheaper deals. If you research the market and compare rates, you could find big savings are there to be made, particularly if the value of your house has gone up since you took out your original mortgage. But don’t forget to bear in mind extra costs such as valuation and product fees and Early Repayment Charges, and factor these into any calculations of how much money you could save each month.
Pay off your mortgage over a longer period
You could reduce your monthly mortgage payments if you increase the term you’ll pay over. But bear in mind that you’ll have to pay more interest overall if you take longer to pay off your mortgage. If your circumstances change in the future and you’re able to pay more later on, you could possibly reduce your term again, but you’ll need to discuss this option with your
Take out an offset mortgage
Offset mortgages allow you to use your savings to reduce the cost of your mortgage, so instead of earning interest on your savings, you can cut the amount of interest you pay on your mortgage.
You can still access your savings, but be aware that your mortgage payments will increase again if you dip into them at any point. You may also have the option of linking up with friends or family savings, so they can help you while keeping hold of their own savings, depending on which mortgage provider you go with.
Pay more now so you can pay less later on
One way to cut the amount you’ll have to pay in the future is to pay as much as possible up front. This could be a good option if you know that your household earning capability will be reduced in the future, for instance if you plan to take parental leave or want to go part-time at work before you retire.
It’s all about planning ahead and could massively pay off in the long run. But remember that some mortgage providers and products might have a limit on the amount you can overpay. So always speak with your mortgage broker for advice before increasing the amount you’re paying.
If you’re looking to get a better deal on your existing mortgage we’d love to hear from you. Get in touch and we’ll be help you understand what’s possible, or sign up to our monthly newsletter, to keep your finger on the pulse.
Sam Murphy – 17th February 2022