Ways to reduce your mortgage payments

schedule 3 min read

Check to see if you are on a Standard Variable Rate (SVR)

Staying on the SVR after your fixed or discount deal ends could mean you’re paying more than you need to each month. SVRs tend to be higher rates than fixed deals. It’s worth checking what your rate is, as some lenders like the West Brom have different standard variable rates depending on your loan to value.

Find out more about SVR and DSVR

Extend your mortgage term

Spreading your repayments over a longer period can reduce your monthly bills, although you’ll pay more in interest over the term of your mortgage.

Here’s a quick example:

• A £200,000 mortgage over 15 years at 5% = £1,582 a month and £84,754 total interest.
• The same mortgage over 20 years = £1,320 a month, but £116,876 in interest.

So yes, your monthly cost goes down, but you’re paying more over the term of your mortgage. You can always reduce your term again later if your finances improve.

Look to remortgage to a cheaper mortgage deal

Mortgage rates can change a lot over a year. If you know what rate you're paying today, why not look to see whether you're eligible to remortgage. Remember there are fees associated with remortgaging so bare these in mind and that you'll have to go through a full application. Check out our guide on the costs involved with remortgaging  for more information.

Overpay when you can

Got a bit of extra cash at the end of the month? Making overpayments (if your lender allows it) can cut the total interest you pay and shave time off your mortgage. Just double-check there aren’t any charges first and look at any other debt you might have before considering overpaying.

There are limits on how much you can overpay before you have to pay early repayment charges (ERCs), so it's best to check with your lender first.

Consider an offset mortgage

An offset mortgage links your savings account to your mortgage. It uses your savings balance to reduce the amount of interest you have to pay on your mortgage.

For example, if you have a £250,000 mortgage and £25,000 in your linked savings account, you will only pay interest on the remaining £225,000.

If you’ve got savings sitting around, an offset mortgage might work for you.

Not all lenders offer offset mortgages, so check with yours if this is something they provide. At West Brom, we don't offer offset mortgages.

Consider an interest only mortgage

Interest only mortgages let you pay just the interest for the mortgage term, the capital balance must be paid in full at the end of the mortgage term.

To switch to interest only or take on a new interest only mortgage, you would need a repayment plan in place which is accepted by your lender. Just remember, you're only paying the interest each month, not the actual loan so this option isn't for everyone.

That said, interest only mortgages are harder to get nowadays, and you’ll usually need a solid income and decent equity in your home. And don’t forget, you’ll still need a plan to repay the mortgage later or you might have to sell your home.

Improve your loan to value (LTV) ratio

Loan to value (or LTV for short) is a percentage of how much you've borrowed as a mortgage compared to the value of your property. Lower LTV = better rates. So, it's worth regularly checking where you're at with your mortgage - even a small overpayment or increase in property value might get you into a lower LTV bracket.

Find out more about LTV

Boost your credit score

A better credit score can help you access lower mortgage rates. Your credit score along with your ability to repay the loan, affects who will offer you a deal and what rates you might be offered. It’s worth reviewing your credit file before applying for a new mortgage or remortgaging.

Find out more about credit scores

Tell your lender if you're struggling to keep up with payments

If you have any worries or concerns about being able to pay your mortgage, don't put off speaking to your lender. It's best to talk to them as soon as possible so that they can help you.