Looking to ease the burden on your finances? A great way to do so is to look through your monthly outgoings and check whether you really are getting the best possible deals.
One major financial commitment that can leave many homeowners feeling cash-strapped is the monthly mortgage payment, which can account for a significant proportion of a household’s outgoings.
With this in mind we have come up with seven ways to help you lower your mortgage payment, check them out…
At the end of your fixed, or introductory, rate, rather than just accept your mortgage lender’s standard variable rate (SVR), shop around for a new deal. With a SVR mortgage your lender sets the interest rate, which is more than likely to be much higher than you need to pay. While you will likely incur admin charges to move to a new deal, (which can often be added to your loan amount), finding a great deal with better rates could save you a significant amount each month.
Whether you are on a SVR mortgage or coming to the end of a deal, it pays to shop around. Comparison sites are a good place to start and will give you a feel for the deals available on the market. Seeking advice from an independent mortgage advisor could also be beneficial. Advisors often have access to mortgages and deals not widely available, and they can also help assess how affordable a particular deal is for you and help find the right deal for your financial circumstances.
If you have paid off several years of your mortgage it may be possible to lower your monthly payments by once again extending the life of your mortgage. The advantage here is that the capital you owe is spread over more years, reducing the amount you need to pay back each month in order to pay the loan back by the end of the mortgage term.
However, in adding years you will be paying interest for longer too. This could be remedied by over-paying on your monthly payments at a point in the future when your finances are in better shape.
If you are finding your monthly repayments tough to handle, take a look at what you are actually paying for. Along with the mortgage itself, you may also be paying for life insurance, building and contents insurance and mortgage protection insurance as part of a complete package. If so, break down the costs of each and then shop around, could you find insurance deals elsewhere that offer the cover you need at a cheaper price?
Depending on your lender/ type of mortgage, it may be possible to take a payment holiday. To qualify, lenders typically require borrowers to have made uninterrupted payments for a set period of time. While only a short-term fix (lenders usually won’t let borrowers take a payment holiday for more than a couple of consecutive months), a payment holiday can be beneficial, allowing borrowers to use the money to pay off other costs.
If things are getting really tight and you are regularly struggling to make ends meet, consider letting a room within your house as a way to share the costs. With the Rent a Room scheme, you can earn up to £7500 per year tax free from rent, giving your incomings a much-needed boost.
If you have savings that you do not intend to touch, getting an offset mortgage could be a good idea. You’ll need to have your savings and mortgage with the same lender as they will be linked together. If for example, you have savings of £30,000 and a mortgage of £230,000, the lender will offset your savings against the mortgage, meaning you only pay interest on £200,000. This can work by lowering monthly payments, or if you choose to keep payments the same, reduce the number of years you’ll pay the mortgage back.
If you find yourself facing real financial difficulties and struggling to pay your mortgage, be sure to contact your lender as soon as possible; before you start to incur arrears. Working with your lender you may be able to come to a solution that eases your financial burden in the short-term to help you get back on to your feet.