Consider remortgaging to reduce monthly payments

Reduce mortgage payments to help during the cost-of-living crisis

Tuesday 26 July, 2022

Mortgage repayments are often the largest outgoing that homeowners face on a monthly basis. Recent unprecedented increases to the cost-of-living have naturally placed additional pressures on household incomes. 

In this article, John Pringle, Mortgage Broker and Protection Adviser in Tottenham and Edmonton, North London, reviews remortgage options to help during the cost-of-living crisis. 

At times like these it can be a good idea to try to “save for a rainy day”. But naturally, this leads many to ask “how do I do that when so many costs are increasing?”. 

An important consideration is not necessarily to work harder, but to start by minimising your outgoings by reducing any reliance you may have on loans, credit cards or buy now pay later schemes. Once monthly commitments have been reviewed and hopefully reduced, you may create disposable income to cushion the blow of the increases in the cost-of-living. While budgeting, it is important to factor in further Autumn increases to energy costs.

Will a remortgage reduce mortgage payments?

During these difficult times, my advice for everyone thinking of remortgaging in 2022, is to carefully consider the range of options that are available to you. It is always important to speak with a professional mortgage adviser before remortgaging, to ensure the product you take is the best fit for your financial circumstances. 

Option A – Remortgage to extend the term 

If you are at an age where you are able to increase the term of the mortgage repayments, for example from 20 years to 25 years, then, dependent on the interest rates, this can help reduce your monthly repayment amount. However, it is worth noting that this option increases the amount you will pay in interest over the full term of the mortgage.

Option B – Remortgage to part repayment, part interest only 

As with option A, this choice of remortgage can help to reduce the monthly repayment amount to help cushion the impact of the cost-of-living rises. However, there is a longer-term view that must be assessed prior to taking this type of mortgage product.  There will be an outstanding amount that will need to be repaid at the end of the term, so a strategy to account for this balance will need to be considered from the start of the remortgage. 

Option C – Remortgage to a 5 year fixed rate

Remortgaging to a 5 year fixed rate mortgage can help protect you from further increases in interest rates during the fixed rate period, and has the potential to reduce the current repayment amounts. 

However, if you are considering taking any additional borrowing, for those who can afford the payment, it will be worth arranging the loan now as the cost of borrowing is likely to increase in the short term. 

John Pringle, Mortgage Broker Adviser in Tottenham and Edmonton said:

“Whilst it may seem difficult in today’s financial climate, wherever possible it is worth trying to put some money away for “a rainy day”. This “emergency only” fund will be helpful if you encounter any unforeseen expenditure in the future. It is also worth looking at your monthly mortgage payment, to find out if this can be reduced or rearranged.”

If you would like to investigate options to switch your mortgage to reduce monthly mortgage payments, contact your local Thomas Oliver Mortgage Adviser or speak to John Pringle, our Mortgage Broker in Tottenham and Edmonton, North London.

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