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  • Writer's pictureJonathan Norcutt

How Can I Lower My Mortgage Payments?

8th January 2024

(information contained within was correct at the time of publication but is subject to change)

 




If you’re a homeowner in the UK currently paying off your mortgage, you are likely experiencing a dramatic increase in your monthly repayments.

 

The cost of living and rising inflation may mean that you are struggling to make ends meet. And so, you might be looking for ways to lower your mortgage payments to combat high mortgage interest rates.

 

Within this comprehensive guide, we are going to provide you with valuable tips and strategies that could help you lower your monthly mortgage payments.

 

Review Your Current Mortgage 

 

The best place to start when trying to lower your mortgage payments is to take a moment to review your current mortgage.

 

To do this, you should start by approaching a reliable mortgage advisor who can do this for you.  When you ask a mortgage broker to do this for you, they will review the most important elements that make up your mortgage. Which are:

  • The interest rate

  • Payment term

 

Now that you are certain of your interest rate and term, you and your mortgage broker can scan the market. New mortgage deals are bursting onto the market all the time, so you want to be sure you’re not missing out on a better deal.

 

Even if the mortgage deal you are on right now was a good deal, it’s never a bad idea to review your circumstances and options. 

 

If you’re not locked into a fixed or discounted rate mortgage deal, you could be remortgaging onto a lower rate should a better deal come along. But more on that later. It’s good practice to regularly review your mortgage once a year. To stay on top of it, set a reminder to sit down with your mortgage advisor to review your mortgage.

 

Discuss Your Mortgage Term With Your Lender And Advisor




 

When you first take out a mortgage to buy your home, you will borrow the cost of the home and repay that amount, plus interest, over an agreed amount of time – a term.

 

For example, if you borrow an amount of £200,000 over a term of 25 years, that means you have 25 years to pay back that £200,000 loan as well as the interest.

 

So, one way reviewing your mortgage could help you lower your monthly mortgage repayments would be to extend your term. With a longer term, month-to-month, your repayment amount will be lower.

 

However, increasing your mortgage term will mean that you will end up paying more in the long run. With that being said, this may be ideal for you if it relaxes the strain on your monthly budget.

 

Make An Overpayment 

 

When you review your current mortgage, it may be the case that you have some money tucked away that could go towards your mortgage. If so, you could use this to make an overpayment on your mortgage.

 

This can be a simple solution to lowering future payments. Before deciding to do so, ensure you have carefully reviewed your mortgage terms to see if your mortgage comes with an early repayment charge.

 

This is something your mortgage advisor will be able to help you with. 

 

Review Other Expenses 



 

If you’re struggling to meet your monthly mortgage payments, you could review your other monthly outgoings as well as your mortgage.

 

You may find that you are still paying for a membership you don’t use, or a hefty subscription charge may be coming out of your account each month that could be going towards your mortgage instead.

 

By reviewing your monthly budget and outgoings by yourself or with the help of your mortgage advisor, you could allocate more funds to your mortgage repayments, therefore making them a little more manageable.

 

Remortgaging Onto a Lower Rate Mortgage

 

Remortgaging is very similar to taking out a new mortgage entirely, in the sense that you will have to show you can afford repayments, have a good credit record, and meet the necessary criteria to be deemed eligible.

 

What exactly is remortgaging? Quite simply, this is the process of moving your mortgage on an existing property from one lender to another. You may be remortgaging after your current mortgage deal has ended, or as a result of reviewing the current market in search of a better interest-rate deal.

 

Remortgaging before your current deal ends means you may be charged penalties. But if you aim to lower your monthly repayments, paying the penalty charge and going with a better deal with mortgage interest rates more suited to your situation, may be worthwhile.

 

What are the steps to remortgaging?

  1. Review your current mortgage deal – Confirm your current interest rates, monthly payment amount, and how long there is left to pay.

  2. Find the best deal – This is something your mortgage advisor will be able to do for you. They’ll scour the market to compare different available deals.

  3. Make your mortgage application – Up to six months before your current deal ends, you can begin the process of applying for a new mortgage deal.


Building Home Equity 



 

What is home equity? How much equity you have in your home could be described as how much of it you “own”. It’s the difference between the current value of the home and how much money you owe on your mortgage. Otherwise known as loan to value or LTV.

 

Once you pay off your mortgage, you will have 100% of the equity in your home.

 

One way to build home equity is to pay your monthly mortgage repayments. Every time you make a payment, you’re closing the gap between the value of your home and how much you owe on your mortgage. In other words, you’re getting closer and closer to making the home yours and yours alone.

 

But if you’re struggling to meet your monthly payments, how are you supposed to build home equity?

 

An increase in property value could help, should you decide to remortgage and are eligible for a better rate due to having a better loan to value.


  • Increase in property value – You should keep an eye on your local housing market. If house prices are rising in your area, your home may now be worth more than when you bought it. If so, your equity will increase. You may then be eligible to remortgage onto a better rate. Monthly payments may decrease due to the new LTV (loan to value). However, this can be subject to additional costs and rates available at the time. In any case, speak to a professional mortgage advisor about LTV and lowering monthly mortgage repayments.

 

Credit Score Improvement 




 


To improve your chances of more manageable monthly mortgage payments, you should try to improve your credit score.

 

In our previously published blog, we learned how your credit score can affect your mortgage application.

 

In the blog, we learned how having a good credit score affects your chances of being approved for a mortgage. The same is true for mortgage rates – the higher score you have, the mortgage rates you’re offered will be more favourable, i.e. lower.

 

So before applying for a mortgage, if your credit score is “poor” or “fair”, try to raise it to “good”, “very good” or “excellent.” This way, you’ll start your mortgage with payments you are more likely to be able to afford.

 

If you want to remortgage, then having a high credit score will play in your favour. But there are also several other factors that a remortgage lender will consider, such as how you are managing with your monthly mortgage repayments, home equity, and more. You should speak to a mortgage broker to better understand the impact your credit score has on your mortgage.

 

Variable Rate Mortgages

 

In the UK, there are multiple different types of mortgages. Although each one works in a similar way, different factors allow some mortgage types to provide lower repayments. 

 

There are two main types of mortgage interest rates:

  • Fixed Rate — The interest rate stays the same throughout the length of a benefit period

  • Variable Rate — The interest rate can change monthly

 

If you are on a variable-rate mortgage, there is a possibility that your monthly mortgage repayments could be less. But there is always the possibility of your repayment amount increasing depending on instances that are out of your control. 

 

A variable rate mortgage’s interest rate is often affected by the Bank of England’s base rate. However, different variable rate mortgages come with different ways their interest rate is affected. 

 

The variable rate mortgages in the UK are:

  • Standard Variable Rate

  • Tracker Rate

  • Discounted Variable Rate

 

While these mortgages offer the possibility of lower mortgage repayments — based on the Bank of England base rate and other factors affecting interest rate — they also come with a possibility of mortgage repayments increasing.

 

Government Help: Support For Mortgage Interest (SMI)



 

When it comes to government assistance for lowering your mortgage payments, one option you have is Support for Mortgage Interest. This is a way for the government to help pay towards payments on your mortgage. It’s important to note that with SMI, you receive help to pay the interest on your mortgage, not for the amount you borrowed.

 

To be eligible for an SMI loan, you will need to be receiving one of these qualifying benefits:

  • Income Support

  • Income-based Jobseeker’s Allowance (JSA)

  • Income-related Employment and Support Allowance (ESA)

  • Universal Credit

  • Pension Credit

 

If you are eligible, you could receive help paying the interest on your mortgage up to £200,000 or £100,000 (depending on your situation).

 

Keep in mind, that SMI is a loan. You will need to pay the amount borrowed back as well as interest when you sell your home, transfer ownership of your home, or move the loan to another property. However, if you want to pay back earlier, this is possible.

 

If you want lower monthly mortgage payments, seeking government help could take a chunk of the debt, momentarily, off your shoulders by helping you pay the interest of your loan.

 

Final Thoughts On How To Lower Mortgage Payments

 

There are a handful of ways you can lower your monthly mortgage payments. Though, as always, we implore you to conduct further research before making any decisions. To ensure you’re heading on the right track, you should speak to a mortgage broker.

 

They will be able to understand your unique situation and advise on the best way forward. The team here at Norcutt Mortgages have helped many homeowners understand their mortgage responsibilities to stay in a home they love.

 

Reach out to our team today with your enquiry and we will get back to you promptly.

 

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