Your home may be repossessed if you do not keep up repayments on your mortgage.

With mortgage rates on the rise, along with the increased cost of living it’s no surprise that we regularly get asked by people looking to remortgage or purchase, ‘what can I do to reduce my mortgage payments?’.

Let’s tackle the bad news first. If you are tied into a mortgage product at the moment there isn’t a huge amount you can do, to be honest. Not without remortgaging and therefore paying your Early Repayment Charge. If you are struggling with your mortgage payments, or think you might start to struggle you should contact your current lender straight away! Sometimes, they can offer ‘Payment holidays’ to give you a break from your mortgage, or you can even arrange underpayments. That way you are still making a payment but just a reduced amount. It is imperative that you ask your lender though whether this will have an impact on your credit as more often than not, even though they’ve authorized it to help, it will go down as a missed payment on your credit file. And that is not good at all!

‘Payment Holidays’ are something lenders can allow to give you a break from payments however, it often will go down as a missed payment on your credit file. However, if you’ve been overpaying on your mortgage you may have some flexibility. Let me give you an example,

Your mortgage payment is £1,000 per month but you have been overpaying £250 on top of this for the last 18 months. This would mean you’ve overpaid £4,500 (£250 x 18 months). If you speak to your lender, they may allow you to take a payment holiday to the value of these previous overpayments without it impacting your credit history. i.e. they may allow you to have a break from your mortgage for 4 months in the example above.

Just to reiterate though, YOU MUST CONTACT YOUR MORTGAGE LENDER AND DISCUSS THIS WITH THEM BEFORE MAKING ANY CHANGES TO DIRECT DEBITS OR YOUR PAYMENTS. Do not just cancel your payments and assumed you are entitled to it just because you’ve made overpayments.

How to keep mortgage payments low if you are a New Borrower or are Remortgaging.

There are many flexibilities with mortgages. Let’s cover some of them and how they may help reduce the initial mortgage payment for you.

Product Type – For the majority of the last 5 years people have mainly looked at fixed rates. The market has been low and therefore it made sense to fix your payment, while it was low. However, now that rates are increasing it may be worth considering variable products. A variable product, like a discount rate or tracker rate, can change at any time so don’t offer the same peace of mind or ability to budget, which of course can mean they aren’t right for you. BUT, if you are happy with this risk, they can prove to be lower than fixed rates at the moment and you could even see your rate reduce if the market goes down. The market can also go up though, hence the name ‘variable’.

Term – Mortgage terms can be taken for anywhere up to 40 years. If rates are higher at the moment and your mortgage payment is too high, you could consider extending the overall term of the mortgage. This will help reduce your mortgage payment (if you are on a repayment mortgage of course) but would mean you are paying interest for longer and reducing your debt more slowly.

It’s an option though and only temporary. For example, if you were taking out a mortgage and extended your mortgage term to 35 years, it doesn’t mean you have to have the mortgage for 35 years. It just means that for the duration of your next product (i.e. 2 years) the payments will be based on 35 years. When you get to the point that you need to remortgage, if your situation has improved you can decrease your term to whatever fits.

Interest Only – Interest Only on its own can be very difficult to get. Lenders are nervous about it and often ask you to jump through many many hoops in order to qualify. However, it is easier to look at a ‘part and part mortgage’. This is where some of your mortgage is on Interest Only and the rest is on Repayment. This could serve to reduce your payments as you are only paying interest on a portion of it and not paying back the capital.

As with all of these areas, there are downsides as well as up. There is also, as with all mortgages, a lot of qualifying criteria you need to meet in order for them to be possible. Therefore, and I’m sure this won’t come as a surprise to you, you must SPEAK TO A BROKER!

We’ll help run through the options, outline the positives and negatives and make sure we do the best we can to meet your goals moving forward.

Next Steps:

We are happy to talk through all the options with you, find the right lender and take care of the leg work for you.

If you are thinking about remortgaging or taking a new mortgage and you are worried about the rising rates, do give us a call on 0117 332 5197. Our initial conversations usually last around 15 minutes.

Alternatively, you can email enquiry@lloydwellsmortgages.co.uk and let us know how we can help you.

We will discuss:

  • How much you can borrow
  • What that will cost
  • What fees can you expect
  • How Lloyd Wells Mortgages work
  • What insurances you will need
  • What documentation you will need to provide
  • Next steps

Your home may be repossessed if you do not keep up repayments on your mortgage.