How to tackle rising mortgage repayments
Many households are currently facing tough times with regards to their finances. Alongside soaring energy prices and rising inflation, interest rates are set to increase further this year making those mortgage repayments just that bit harder to meet. So what you can you do to help your payments stay within reach? Long-term fixed rates Fixing your monthly payments while the rates are a bit lower is a good idea if you possibly can. With the financial climate still so uncertain knowing that your mortgage payments will stay the same, regardless of whether the cost of living continues to rise, can really lessen the worry for many. You will likely pay more interest on a five-year fixed rate deal than on a two-year deal, but that may be a compromise worth making to help ensure financial stability longer term. Remortgaging If you are coming towards the end of your current mortgage deal, then remortgaging needs to be something that you look at in order to help cut those monthly outgoings. There are still some good deals to be had while rates are lower so it’s best to take advantage of these sooner rather than later. There will normally be an early repayment charge to your current lender if you leave too soon before the end of the deal, but keep in mind that you can remortgage six months before your current deal ends.
While rates are still low, making an overpayment on your monthly mortgage repayments may be very worthwhile. Most mortgages allow overpayments of up to 10% per year which can make a huge difference to how much you owe, and therefore how much you have to pay monthly. For example, overpaying by £50 a month can take nearly two years off your mortgage saving you more than £5000 over the whole term. Offset Mortgages An offset mortgage links your savings account to your mortgage, in this way the lender treats any savings you have as mortgage overpayments. You are able to use the savings you have chosen to offset if needed, but this does affect how much interest you pay. Your savings and mortgage must be with the same provider. Deposit Size Matters The size of your deposit really can make a huge difference in terms of accessing the lowest rate deals available. This will ensure both that your monthly payments are lower, but also that you will pay less over the whole term of the mortgage. A 20% deposit is a great starting amount, but if you can save that bit more and have a 25% deposit available, you will be able to access many more of the deals available on the market with potentially much lower interest rates. Part and part mortgages A Part and part mortgage offers some flexibility in terms of payments which can suit those who would like the option to pay more or less each month.
Some of the mortgage is loaned on a repayment basis, and some is interest-only. This product can be tailored to suit your needs allowing overpayments to be made if and when extra income comes in. Lenders will still want evidence that you are able to meet your repayments so it’s important to discuss the different options with a mortgage broker. Green Mortgages If your home has an energy efficient rating of A or B then you may qualify for some of the best mortgage deals available. Green mortgages can offer lower interest rates, additional borrowing at lower rates, or even cashback when you take out the mortgage. Check the Energy Performance Certificate (EPC) rating of your current home or any new purchase to see if the property meets the green mortgage requirements. We have over 20 years' experience in the mortgage industry and put family at the heart of everything we do. Get in touch now to see how we can help you.