10 ways to lower mortgage payments

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.

Angela Kerr Director, Editor

Why lower mortgage payments?

With mortgage rates so much more expensive than in recent years, and with uncertainty as to when mortgage rates will go down, it’s vital to review your current mortgage situation.

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.

How to lower mortgage payments

1. Check you’re not on a standard variable rate (SVR) mortgage

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. It is both how mortgage lenders make their profits, and how they pay for the cheap introductory deals which lure customers in the first place. 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 are changing 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.

You can check you’re on the best rate by contacting our fee-free mortgage partners at L&C. Start the process online  or over the phone. Set them to work finding the best deal for you today.

2. Look at switching to an interest-only mortgage

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 and having a considerable amount of equity in your home. However, if you’re having difficulty paying your mortgage, your lender may offer this option. Read on to find out more.

But beware – taking 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.

Mortgage expert David Hollingworth at our partners L&C said, “I think that switching from repayment to interest-only is something that we’d suggest borrowers avoid if at all possible. By reducing their monthly payments in this way, borrowers will ultimately push up the cost of the mortgage long-term”.

3. Extend your mortgage term

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.

To explore your mortgage options, contact our fee-free mortgage partners at L&C. Start the process online or over the phone. Set them to work finding the best deal for you today.

4. Look for a cheaper mortgage deal

The days of being able to save cash by switching your current mortgage deal and remortgaging onto a cheaper one are long gone for most mortgage-holders.

However, this won’t be the case for everyone. The easiest way to check you’re on the best mortgage rate is to use mortgage brokers L&C’s Rate Check service. Their expert brokers will scour the market to see if there’s a better mortgage deal for you. Plus, they’ll check whether there are any administration fees or early repayment charges for switching from your existing lender. Also, L&C are fee-free, unlike many brokers which charge fees that can amount to thousands of pounds. So there’s nothing to lose from getting in touch.

5. Find cheaper mortgage insurance

You might be able to cut down on other costs by switching to cheaper mortgage protection insurance, buildings or contents insurance.

If you purchased income protection from your mortgage broker, they may have been tied to one provider and it might not have been the best deal. So dig out your documents and shop around to find out if it’s the best deal.

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. To find out more, speak to our partners at Howden Insurance.

6. Overpay on your mortgage repayments

You can cut your mortgage payments in the long term if you are able to make overpayments whenever you can. 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.

But make sure there aren’t any other expensive loans or credit cards that need dealing with first, and once you have a rainy day fund for any problems, you can start using spare income to pay off your mortgage.

7. Consider an offset mortgage

However, 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.

8. Improve your LTV

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.

9. Improve your credit score

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.

10. How to lower mortgage payments if you’re struggling to pay

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.

Can you ask family for help to pay your mortgage?

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.

Can I lower mortgage payments on a shared ownership property?

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?

Where else can you save?

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.

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