Rising mortgage rates are becoming a growing concern for countless households, here are 5 ways how to cut your mortgage payments.
So as the cost of living in the UK continues to head upward, 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. But with rising rates, is this still an option?
Of course, the mortgage market is complex and ever-changing at the moment, and with countless different options open to you, where you do begin? So, it’s well worth speaking with a mortgage broker, like Pinpoint Finance, who has expertise in this area and can guide you through the complexity of the mortgage market and point you in the right direction. That said, here are just 5 simple ways you could reduce your mortgage payments.
1- Look for cheaper deals
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. However, at the moment, this may not be the case, so check with a mortgage broker. They will review the fixed rates for you and potentially save you thousands on your mortgage payments.
2- Get a lower loan to value product
When you are researching the market and comparing 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. It’s worth making sure that your lender is aware of any major improvements you have done to your home and that you know what your house is worth.
It may even be cost-effective to reduce your mortgage amount with a lump sum to get a lower loan-to-value product. 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.
3- 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 mortgage provider.
4- Take out an offset mortgage
Not one that jumps to mind and isn’t for everyone, but an offset mortgage allows 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
5-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 upfront. 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.