02 Feb Want to reduce your monthly mortgage payments? Here’s five tips that can help.
If a high mortgage rate is leaving you with less in your pocket each month than you’d like, there are several things you can do to potentially lower the monthly repayments.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Shop Around Regularly
Many mortgage lenders offer appealing introductory rates, but can switch to a standard variable rate (SVR) after their introductory rate has expired. Although there are advantages to SVRs; unfortunately if the national interest rates are high, homeowners with SVR mortgages could be paying more in interest than they really need to. It may take a bit of leg work, but shopping around for better deals every few years could pay off in the long term.
Daily Interest Calculation
If the interest on your mortgage is calculated annually, rather than daily; you could be paying interest on the part of the loan you have already paid off. By switching to a loan with daily interest calculation, it could cost you considerably less than a loan with annual interest and you’re likely to notice the difference almost immediately.
Consider a fixed rate
It is notoriously hard to forecast what will happen with interest rates in the future – but securing a competitive low fixed rate now could work out to be highly beneficial in the future. Most banks will fight for your business with competitive fixed rates, but be sure to factor in their fee as well – these can vary.
Interest Only Deals
If your income is not steady, but you instead rely on lump sums such an inheritance or bonuses/commission; you may be able to pay off your mortgage in several large repayments. This may allow you to switch to an interest-only deal. These can often be hard to find, and of course can involve risks which could result in having to sell your home or have your home repossessed. Discussing the pros and cons with your mortgage broker is important so you can find out if an interest only deal is the right option for you.
Ask to Reduce Repayments
If the value of your property has increased and is now worth more than what is owed on the mortgage, your lender may agree to reducing your monthly repayments. You could also look into extending the period of time over which the mortgage is paid, this is a temporary option which can be a good choice for people who tend to have irregular sources of income. This option has disadvantages though, especially as it will mean that you have to pay interest over a longer term – so it’s best to seek financial advice to ensure this option is worth pursuing.