How to reduce your mortgage payments
If you are in a difficult place financially, reducing your mortgage payments can make a huge difference. There are many options that can lessen your monthly payments.
1. Contact Your Lender to see if you can Extend Your Repayment Term
One way to reduce your mortgage payments is by extending your repayment term. If you extend your 10-year mortgage to a 25-year mortgage, your monthly instalments will decrease as you now have a lot more time to pay back your loan. Whilst this means you will pay more interest on your mortgage, in the long run, it’s a solution for those that are struggling financially in any way and need to cut costs in the short-term. If you do opt for this, when you are back on a better financial footing, you should contact your lender to increase your payments and therefore reduce the term back down.
2. Research Whether You Can Switch to An Interest-Only Mortgage
By switching to an interest-only mortgage, your monthly payments will only cover the interest on the loan, not any of the capital. The outstanding mortgage balance will stay the same until you switch back to a repayment mortgage or pay off the debt in one go at the end of the term.
It’s important to remember that using interest-only should be a temporary way to lower mortgage payments because at the end of the term you will be expected to pay the outstanding loan in full. Again, as soon as you are back on a better financial footing you should contact your lender to switch your mortgage back on to a normal repayment basis.
3. Get Your Property to Generate Income for You
If you have extra space in your property, having a tenant can make a big difference to your
income so making your monthly mortgage payments more affordable. If you have a spare room you could rent it to a tenant. Or, for up to a maximum number of days a year, let your property through a holiday lettings company or possibly Airbnb.
If you have a residential or buy-to-let mortgage on your property and you want to let it out on a holiday lettings company like Airbnb or a private tenant, you may need to first ask your lender for permission to do so, sometimes known as “consent to let”. This allows you to let out your property but remain on the existing mortgage, although the interest rate could change. For guidance on how to become a landlord, click here.
Following this guide does not constitute you taking legal advice. The Home Guide Expert Limited is not regulated by the FCA (Financial Conduct Authority) and does not claim to do so. We recommend that you always check with an FCA regulated Mortgage Advisor/Financial Advisor before making any financial decisions to ensure that a product and/or service is suitable for your circumstances.