How Remortgaging Can Reduce Your Payments
The most straightforward way to lower your monthly payments is to remortgage to a lower interest rate. If you're currently on your lender's SVR or an older deal with a higher rate, switching to a competitive new product can reduce your payments significantly. Even a 0.5% rate reduction on a £200,000 mortgage saves roughly £50 to £60 per month.
If your current rate is already competitive, extending your mortgage term is another option. Spreading the remaining balance over more years reduces each monthly payment, though you'll pay more interest overall. Some borrowers combine both approaches — securing a better rate and extending the term — for the maximum monthly reduction.
Extending Your Mortgage Term
Extending your term is an effective way to lower monthly payments, but it comes at a cost. The longer you take to repay the mortgage, the more interest you pay in total. For example, extending a £200,000 mortgage at 5% from 20 years to 25 years reduces your monthly payment by roughly £150, but increases the total interest paid over the life of the mortgage by about £34,000.
This trade-off may be worthwhile if you need short-term relief — perhaps due to a change in income or increased expenses. You can always make overpayments later when your financial situation improves, effectively shortening the term again without the commitment of higher contractual payments.
Switching from Repayment to Interest-Only
The most dramatic reduction in monthly payments comes from switching to an interest-only mortgage. With interest-only, you only pay the interest each month and don't repay any of the capital. Monthly payments are significantly lower, but your balance never decreases — you still owe the full amount at the end of the term.
Interest-only mortgages are much harder to obtain than they were a decade ago. Lenders require a credible repayment plan — such as investments, savings, or a plan to sell the property — before they'll approve an interest-only deal. This option should be considered carefully, as it can lead to significant financial problems if you don't have a realistic plan to repay the capital.
Other Ways to Reduce Monthly Costs
Beyond the mortgage itself, consider other options for reducing your housing costs:
- Negotiate your buildings insurance: Switching insurer can save hundreds per year
- Check for overpayments on your current mortgage: If you've been overpaying, you may be able to request a payment reduction
- Consider a payment holiday: Some lenders allow temporary payment reductions or breaks (though interest still accrues)
- Review your mortgage type: An offset mortgage might reduce your effective interest if you have savings
Important: Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual rate available will depend on your circumstances. Think carefully before securing other debts against your home.