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How to reduce your mortgage payments

Journalist: Esther Shaw, Freelance

ended 02. March 2023

 I'm writing an article on ways to reduce your monthly mortgage payments. 

Looking for comment and tips on different ways to bring down the amount you pay. 

Also looking for comment on whether it's better to reduce the term of my mortgage - or overpay?

 

Thanks so much

10 responses from the Newspage community

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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Lots of homeowners are struggling at the moment, and the only ways to reduce your mortgage payments are to reduce the interest rate you are paying or extend the term. Extending the term will mean you pay much more over the total period of having a mortgage, so getting a cheaper rate is the best option. A good adviser can listen to your circumstances and find an appropriate product.

For those in serious financial trouble, a lender might consider switching you to pay only the interest on your mortgage which could substantially reduce the monthly payments, but they won't accept this forever so another plan of action will have to be sought.
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Katy Eatenton
Mortgage & Protection Specialist at Eatenton Finance
If you're a saver, one of the best (forgotten) ways to reduce your mortgage payments is opting for an offset mortgage. An offset mortgage allows you to reduce the interest being charged on your mortgage balance by offsetting the balance in your savings account. They generally also offer interest-only offset mortgages which will help reduce the payments even more

Even small regular savings can make a big difference!!
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Riz Malik
Independent Financial Adviser at R3 Wealth
If you have savings and are trying to minimise your monthly payments, you may want to investigate offset mortgages. Your savings account is linked to your offset mortgage, and the value of this account is subtracted from the outstanding balance of your mortgage when calculating interest. This means that you only pay interest on the difference between the balance of your mortgage and your savings account. Some lenders will allow you to reduce your monthly payment or the length of your mortgage if you are offsetting. Yet, because offset mortgages often have higher interest rates than conventional mortgages, you should evaluate the entire costs of an offset mortgage and a conventional mortgage to determine which option is best for you.
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Justin Moy
Managing Director at EHF Mortgages
Stretching the term of a repayment mortgage is probably the most common way to reduce payments each month. This will mean that you pay more over time, but short-term savings are the primary objective. Lenders can look to take the mortgage to age 70, 75 or a few go further than that! Having some or all of the mortgage on interest-only terms will again reduce the mortgage payments by quite an amount, again you will pay more over time so needs a steady stomach and some advice. Increasingly, those who have a good level of savings should consider Offset mortgages, as they can reduce the interest cost of your mortgage, either to repay it earlier or reduce monthly payments - most lenders give that choice. This is really attractive for higher-rate taxpayers, as the net rate of interest matches your mortgage rate.
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Kundan Bhaduri
Property Developer and Portfolio Landlord at The Kushman Group
As most mortgage advisors and professional landlords will suggest, the first thing to check is whether you are on a standard variable rate (SVR) product. If you are on one, it is worth fishing the market for a cheaper fixed deal.

Another way is to ask your lender if they would allow you to switch to an interest-only product - you will be surprised, some may allow you (even if for a temporary period). Additionally, you could ask your lender to extend your mortgage term. But remember, both these options will cost you more in the long run.

You could also explore a payment holiday but beware this may affect your credit history in the long run.

If you are lucky to have savings available, overpay on your mortgage or consider an offset product - both of which work well in these times of high-interest rates.
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Samuel Ewen
Managing Director at Rosehill Financial Services
The main factors that determine a monthly mortgage payment are the mortgage term and the interest rate you have. With the recent increase in interest rates, many people may, understandably, look for ways to reduce their monthly payments. There are a few potential ways that this can be achieved. More common examples include extending your mortgage term or searching for a new mortgage deal with a better rate.

If this isn’t enough, another option may be to switch to an interest-only mortgage, whereby you only pay interest and do not pay any capital. This could be a viable short-term solution for some. You’d need to meet the required criteria to do so, and it’s vitally important to understand the risks involved, mainly that you’ll need a means of repaying the full debt at the end of the mortgage term.
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Luke Thompson
Director at PAB Wealth Management
The easiest way to reduce your monthly mortgage payments is to increase your mortgage term if you are able to do so. However, this may prove to be a false economy as you will pay much more in interest if you take your mortgage over a longer term so more than likely it is not the best thing to do.

If you want to pay your mortgage off sooner in my opinion a combination of reducing your mortgage term whilst keeping your mortgage payments affordable as well as looking to overpay if you have the means to is the best way to reduce your mortgage term.

If you are currently benefitting from a lower interest rate my advice would be to overpay by as much as you can do within your lender limits to mitigate any increase in payments when your current deal comes to an end as you may find that the interest rate you pay may be higher
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
To reduce mortgage payments there are a few options; extending the term of a repayment mortgage, or shifting some or all of the mortgage onto interest only is another option but carries with it risks of how you repay the debt at the end of the term. If you have savings then looking at an offset mortgage is another way to maximise the power of that cash and get a reduction in your repayments, whilst still having access to the savings. You could also use savings to make an overpayment on the mortgage and reduce the debt, but once paid off the mortgage you lose access to that money, so it needs careful consideration. If you're in a position to increase your mortgage payments to pay the mortgage off sooner, I would suggest voluntary overpayments rather than reducing the contractual term, as you can always stop the overpayments if needed.
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Steven Morris
Advising Director at Advantage Financial Solutions
If, like many, you are struggling with increased mortgage costs, we are recommending customers consider the following strategies in this order of priority. 1) Reduce your interest rate (win-win). 2) Reduce your mortgage balance, but only if you would still have sufficient 'rainy day' funds after doing so (or consider an offset mortgage which can achieve a similar effect, just non-permanently) 2) Extend your mortgage term If possible (more interest payable overall, but better than missing mortgage payments) 3) Switch to interest only if possible (this has the same issues as term reduction, but worse, as the balance won't reduce at all) 4) Agree a payment holiday with your lender (emergency measure only). Above all, please, please get advice to make sure you achieve the payment levels you need without compromising yourself in other ways.
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Paul Donoghue
CEO at Concept Financial Services
Reducing the term of your mortgage can lead to faster mortgage repayment and significant savings in interest charges over the loan's life. Nevertheless, this option may not be feasible for everyone due to the higher monthly payments that result from it. Overpaying the current deal allows more flexibility and doesn't tie you into higher payments.

The only way to reduce mortgage repayments is to consider remortgaging to a new deal and exploring the product transfer options. Seeking advice from a qualified professional is crucial in reviewing the available options.

If the repayments become unaffordable, extending the loan term might be a viable option, provided that it aligns with your long-term financial goals.

Another consideration is converting to an interest-only mortgage if the loan-to-value ratio supports it.