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Repaying your mortgage every month can be daunting and leave you little to live on. Here are some ways to reduce mortgage payments and make things more manageable.
With the cost of living continually on the rise, everything seems more expensive these days. So it makes sense to review what is probably your largest monthly outgoing – your mortgage.
Here are our top suggestions on how to reduce mortgage payments now, as well as actions you can take to cut your mortgage payments in the future.
The most expensive mistake many mortgage borrowers make is staying on the standard variable rate (SVR) after their introductory rate (whether tracker or fixed rate) has expired. When you’re on your lender’s SVR, the provider sets the rate you pay and SVRs are invariably high.
So if you are on your lender’s SVR, one of the best ways of how to reduce mortgage payments is to remortgage onto a new deal.
Your first step should be to confirm the rate you’re currently on then look at the best mortgage rates available. However, rates can change quickly and the deals you’ll get access to will depend on your circumstances so it’s a good idea to speak to a mortgage broker. They can do the leg work for you.
Get fee-free remortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
If your current mortgage deal ends in the next 6 months you can start the remortgage now. You can get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau to find the best deal for you.
If you lock in a rate now, you can protect against future rate rises, then keep an eye on mortgage rates to see if a better deal comes up before you commit.
Increasing the term of your mortgage will spread what you owe over a longer period and lower mortgage payments each month (for all but interest-only mortgages). However, the downside of extending the term of your mortgage is that you’ll pay more interest in the long run. Use our mortgage cost calculator to get an idea of how changes to the rate and term can affect the monthly and total cost of your mortgage.
For example, if you have an outstanding mortgage amount of £200,000 and 15 years left to pay, on a rate of 5%, your monthly repayments will be £1,582 and you’ll pay £84,754 in interest in total, assuming your rate stays the same throughout the term.
But if you extend your term by 2 years and pay the same amount over 17 years at the same rate, you’ll pay £1457 on your monthly payments. This means you’ll reduce mortgage payments by £125 each month. However you’ll pay total interest of £97,370.
While if you extend your mortgage to 20 years, you’ll pay £1320 a month on your mortgage. As such you’ll reduce mortgage payments by £262 per month, compared to paying it off over 15 years. But you’ll pay total interest £116,876.
So if you do reduce mortgage payments in this way to save money now, if you can cut your term at a later date if your circumstances improve it will cut the overall interest you pay.
If you don’t have a steady income but you are confident of a lump sum, such as an inheritance or a few big bonuses, that will allow you to pay off the mortgage in a few large payments in the future, you could switch to an interest-only mortgage to cut your monthly mortgage payments. As the name suggests, interest-only mortgages are deals in which homeowners reduce mortgage payments by only paying the interest on the loan each month.
These mortgages are not as readily available as they once were however and you’ll usually have to meet certain criteria in order to access one including pretty steep income requirements, having a considerable amount of equity in your home and having a plan in place to repay the loan.
However, if you’re having difficulty paying your mortgage, your lender may offer this option. Read on to find out more.
But beware – taking out an interest-only mortgage does not mean you don’t have to repay it eventually, and without a plan to pay off your mortgage you might end up having to sell your home.
Our Mortgage Expert Sarah Tucker says: “Switching from a repayment mortgage to interest-only may reduce your monthly mortgage costs but it will ultimately push up the cost of the mortgage long-term. Plus, you’ll need to be confident that your repayment vehicle will be sufficient to pay off your mortgage at the end of the term. So if you’re considering this, make sure you think about it carefully and take expert mortgage advice.”
You might be able to cut down on other costs by switching to cheaper mortgage protection insurance, buildings or contents insurance.
So dig out your documents and shop around to find out if it’s the best deal for you.
Read our guide on Do I need mortgage protection insurance where you can learn more about what’s covered and get a quote.
You should also check you’re on the best deal for your buildings and home insurance too. The best way to do so is to compare home insurance quotes — with our service, you can compare 50+ of the biggest home insurance brands.
You can cut your mortgage payments in the long term if you are able to make overpayments on your mortgage. But make sure you check with your lender first that there aren’t any penalties to overpaying. Most lenders do allow overpayments although limits usually apply.
If you have savings but don’t want to tie them up in your house you may still be able to use them to reduce mortgage payments if you remortgage onto an offset mortgage. An offset mortgage is a mortgage that’s linked to a savings account. And the balance on these savings are used to cut the interest charged against the mortgage (therefore saving money). Read more in our guide Should I get an offset mortgage? If you’re considering an offset mortgage, it’s a good idea to speak to a mortgage broker so they can explain the pros and cons and explain your other mortgage options.
Get fee-free remortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
Your LTV – or loan-to-value ratio – tells you what percentage of your home’s value is borrowed. For example, if you buy a £100,000 house and you pay £20,000 as the deposit, your LTV is 80% because you’ve already paid 20% when you put down the deposit and borrowed the remaining 80%. Generally speaking, higher LTVs lead to higher interest rates, because they are seen as riskier for lenders. So if you are remortgaging and you are close to reaching a threshold like 80% or 85% LTV, you may find that hitting that figure means you get access to better deals and therefore reduce mortgage payments in future.
When you apply for a mortgage, lenders will check your credit reports as part of the application process. And your credit score will be a factor in whether your application is accepted, how much you can borrow and the rates you may get access to. So keeping your credit score as high as possible means you may get better mortgage rates. This in turn will reduce mortgage payments in the future. Read our guide 11 Tips to improve your credit score for a mortgage.
If you’re struggling with your repayments you should speak to your lender. There are a number of measures they may suggest such as looking to reduce your mortgage payments for a period. Or they may offer you a ‘mortgage holiday‘.
A mortgage holiday is when your mortgage payments are paused for a period a time. However a mortgage payment holiday doesn’t mean your lender will cover the cost of your mortgage or simply wipe away months of mortgage payments. Instead, they will be allowing you to defer the payments to a later date in the future.
This means interest will still build on your mortgage debt. When you do restart payments your monthly amount will be higher.
Read our guide to Mortgage Holidays which includes the pros and cons to watch out for.
You might feel awkward asking, but could you lower mortgage payments by asking your parents for help? It may be more common than you think. A report by wealth management company Saltus in June 2023 found that 79% of parents in the UK with assets including property of £250,000 or more are supporting their adult children financially, with one in four are helping with mortgage payments.
When you buy through a shared ownership scheme, unless you own 100% of the property you’ll make a monthly payment towards your mortgage and a rent payment to a landlord. And if you’re having money troubles, you may be able to lower mortgage payments by selling back some of your ownership of the property to the landlord. This is called flexible tenure, however it’s rare. If you wish to sell back some of your shares you should contact your housing provider.
However, there may be other options to help you. So if you have trouble meeting your mortgage or rent payments or you are already in debt, get help straight away from an experienced debt adviser. A Citizens Advice Bureau should be able to help.
For more information on shared ownership, read our guide Shared ownership: What is it? Is it worth it?
Don’t just look at how to reduce mortgage payments, see where else you can save. Take a good look at your household budget and consider if it’s possible to increase the money you’ve got coming in or make cutbacks on your spending. And read our guides How can I cut my gas bill and on Top 10 energy saving tips for advice on how to cut your energy bills.
If you are worried you can’t afford your mortgage payments, firstly speak to your mortgage lender. There are several ways to reduce mortgage payments that your mortgage lender may offer such as a mortgage holiday, reduced mortgage payments, extending your mortgage term or switching to interest-only repayments. For more advice read our guide Can’t pay mortgage – what now?
Firstly, check if you’re on the best mortgage rate for you. If you’re on your lender’s standard variable rate you may be able to reduce mortgage payments significantly by switching onto a new deal. The easiest way to get started is to get fee-free advice from a mortgage broker.
One way is by overpaying. Assuming, you’re paying a 5% interest rate and that this stays the same throughout the term, if you take out a £150,000 mortgage over 30 years, your repayments will be £805 a month.
But if you make overpayments of £800 every month, you will clear the balance in around 10 years. However, many lenders limit the size of overpayments you can make to 10% or 20% each year, so check this to avoid the risk of being stung by early repayment charges. For more information read our guide on Mortgage fees and costs.
If you want the flexibility of being able to clear your mortgage sooner, it’s a good idea to get expert mortgage advice from a broker who will be able to explain your options to you.
If you can afford to make extra payments – and your mortgage allows overpayments – overpaying on your mortgage means you’ll pay less interest overall and can pay off your mortgage sooner. But whether it’s right for you will depend on your circumstances. Read more about the pros and cons in our guide Should I pay off my mortgage early.
HomeOwners Alliance Ltd is registered in England, company number 07861605. Information provided on HomeOwners Alliance is not intended as a recommendation or financial advice.
HomeOwners Alliance Ltd is an Introducer Appointed Representative of Mortgage Advice Bureau (Derby) Limited which is authorised and regulated by the Financial Conduct Authority.
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Bridging Loan and specialist lending service provided by Chartwell Funding Limited, registered office 5 Badminton Court, Station Road, Yate, Bristol, BS37 5HZ, authorised and regulated by the Financial Conduct Authority (FRN: 458223). Your property may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it.
