City AM - How to cut your mortgage costs
A journalist on City AM is looking for information and tips on how to cut your mortgage costs.
Very tight deadline on this - the journalist needs comments in the next 30 minutes
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Before your current mortgage deal expires, the lender may contact you to offer alternative products. It may be tempting to choose one and stick with the same company, but as lenders compete for business, there may be better deals available. So, when your deal expires, always shop around or use a broker to do the legwork for you. You could save thousands.
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If you want to reduce the monthly payment, try to increase the term - many lenders will take a mortgage to a 35, even a 40yr term, which might be enough to keep the payment affordable. A few lenders will take your mortgage until your 75th Birthday too.
Do your circumstances allow for an Interest Only Mortgage? This would again reduced the monthly payments to the minimum, but be mindful that the loan balance is not reducing, so you need a clear strategy to repay the mortgage.
Speak to a Broker - having access to the widest choice of lenders and deals will mean you have the comfort you have one of the best deals availbale. Your current account provider will only have access to their own products and cannot advise independently.
Do your circumstances allow for an Interest Only Mortgage? This would again reduced the monthly payments to the minimum, but be mindful that the loan balance is not reducing, so you need a clear strategy to repay the mortgage.
Speak to a Broker - having access to the widest choice of lenders and deals will mean you have the comfort you have one of the best deals availbale. Your current account provider will only have access to their own products and cannot advise independently.
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Firstly seek the advice of a professional who can explain your options, and these will include, converting your mortgage (if repayment) to interest only for a short period, and/ or extending the term of your mortgage as long as you are within the age criteria. Both of these options will reduce your monthly payment, with the interest-only option reducing the payment far more. Don't just accept a new product from your current lender as this is likely to cost you more money and not solve your problems.
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Reducing mortgage costs there are generally two ways:
1. Put some of the mortgage on interest only – this is a tool only available in certain circumstances (lower LTVs, higher incomes generally, minimum wealth / equity requirements) so only something certain people are able to take advantage of these days.
2. Extend the mortgage term in order to reduce costs
Both of these measures should only be taken in certain circumstances, it has to be noted that the longer your term the more interest you will pay on your debt over your lifetime, so not a small decision to take.
On interest only you aren’t repaying the debt so you have to be making sure that you are making adequate provisions to repay it. Many older people are having to remortgage interest only mortgages that they planned to pay off but never managed to.
1. Put some of the mortgage on interest only – this is a tool only available in certain circumstances (lower LTVs, higher incomes generally, minimum wealth / equity requirements) so only something certain people are able to take advantage of these days.
2. Extend the mortgage term in order to reduce costs
Both of these measures should only be taken in certain circumstances, it has to be noted that the longer your term the more interest you will pay on your debt over your lifetime, so not a small decision to take.
On interest only you aren’t repaying the debt so you have to be making sure that you are making adequate provisions to repay it. Many older people are having to remortgage interest only mortgages that they planned to pay off but never managed to.
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Don’t leave it to late, if you have a remortgage in 2023, then engage with a mortgage broker 6-7 months before your deal ends. Not only will we be able to review the whole market, but constantly review the rates over that 6 months to ensure you have best rate available on completion.
If you are purchasing, do research on brokers- costa can vary, just because they charge a £699 fee it doesn’t necessarily mean you are going to get a better service than a fee free mortgage broker.
If you are purchasing, do research on brokers- costa can vary, just because they charge a £699 fee it doesn’t necessarily mean you are going to get a better service than a fee free mortgage broker.
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There are only a few things that directly impact mortgage costs; the interest rate and repayment term. So if you are on a Standard Variable Rate, or any other kind of deal with no early exit fee, then speak to a mortgage broker to look at other deals that may result in a lower payment. If your mortgage is on a repayment basis you may also be able to look at extending the repayment term, which you can do even during a deal with a tie-in, but be aware that you will be paying more for your mortgage overall by doing this and if you are on an interest-only mortgage extending the term will have no effect on your payments.
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Talk to your broker, don't just assume your current lender is offering you their best. Brokers can look across the board and see if there are any better deals out there. It may seem like hassle, but changing lender can save you tens, maybe even hundreds of pounds a year. Make sure you know your fixed rate end date and contact your broker within 6 months of it ending. Don't have a broker yet? Ask for recommendations and don't fall into the 'fee free' trap.
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Shop around. A mortgage broker will do all the research for you to find the best deal across the market.
You could extend the term on the mortgage to make the monthly repayments affordable but the thing to remember is the overall cost will be more expensive.
You can also cut your mortgage payments in the long term if you are able to make overpayments whenever you can.
You could extend the term on the mortgage to make the monthly repayments affordable but the thing to remember is the overall cost will be more expensive.
You can also cut your mortgage payments in the long term if you are able to make overpayments whenever you can.
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Speak to a broker and do it earlier than you would normally.