Are you struggling to keep up with your monthly mortgage payments? Perhaps there are steps you can take to reduce the monthly cost to make your finances more manageable. Here are a few tips…
1] Remortgage with existing lender
Most mortgages offer an introductory offer with a better rate of interest; it’s more like an advertising ploy to get people to sign on the dotted line.
When this introductory fixed rate ends you will revert to the Standard Variable Interest rate, which is usually a lot higher than the initial introductory rate of interest you were paying. A few weeks prior to this happening it is worth contacting your mortgage lender and asking what options there are. The advantage of remortgaging with your existing lender is that usually you will be pre-qualified; and if you have a good payment history with them, they may offer you a better deal.
2] Don’t forget you can remortgage
A common mistake by many homeowners is that they forget about their mortgage once it’s been setup. By avoiding literally a few hours of work every time you have an opportunity to remortgage (which is usually 2 years from starting a policy, unless you’re tied in for longer), you could end up paying thousands and thousands more than you have to.
There are constantly better mortgage deals becoming available on the market, so it’s always worth shopping around. If you do get a better deal, you can use that as a bargaining chip to negotiate with
your existing lender, and they may try and better the offer.
3] Current Account Mortgages
With a current account, also known as “offset mortgage”, you set your savings against your mortgage debt and by giving up earning interest on the former you don’t pay it on the same amount of your mortgage debt.
Over a 25 year mortgage (typical length of a mortgage) this can save you thousands and is highly tax efficient.
Using any savings to cancel out mortgage debt makes sense. Savers avoid paying tax on interest that their deposits would otherwise have earned. And because offset mortgage lenders calculate interest daily, every pound on deposit works hard to reduce the cost of borrowing. Also, in a low interest rate environment, any savings you have are effectively earning interest at a higher rate than most mainstream savings accounts will pay.
4] Switch to Interest-Only
If you’re currently on a repayment plan you maybe able to switch to an interest-only policy. Obviously the downside to this is that you’ll no longer be paying off the balance off your debt, you’ll purely be paying the interest on your debt. However, switching to an interest-only mortgage will reduce your monthly payments. The good thing with interest-only mortgages is that they are generally flexible- most lenders allow you to make regular payments on top of the interest payments, so you can reduce your mortgage when you have any spare cash lying around. Reducing your debt will in-turn reduce your monthly interest payments.