Saving Money on Your Mortgage

What is the best way to try and save money on your mortgage?

These are a few tips which might be worth considering.

  • Use Current account mortgage./ Offset mortgage These are increasingly common. It is a way to combine a current account with your mortgage balance. If you have any spare cash in your current account it is automatically used to reduce your mortgage debt and therefore your monthly mortgage payments. This means there is no money being wasted earning 0.3% interest in your current account. Instead it is being used to reduce a mortgage debt at around 5-6%. That is a big saving, and the big advantage is that you don’t have to think about it – it all happens automatically.
  • Save. If you have an easy way of paying off your mortgage, such as  current account mortgage or flexible deal, make a plan to increase savings and gain a higher fund in your current account. Even if you don’t keep saving, as their will be future opportunities to pay off mortgage debt. With increased savings, you will be in a position to renegotiate a better mortgage deal at the next opportunity. For example, if you scrapped to get a 95% LTV mortgage – in today’s climate, you will be paying a premium for the low deposit, if you can increase the deposit to 10% through saving, then you will be able to find a wider range of mortgages on offer.
  • Take advantage of lower interest rates. Currently, we are experiencing lower interest rates. Take advantage of this to maintain same monthly payments and overpay the mortgage. You can significantly save money from the total interest rate cost by overpaying now.
  • Reduce high interest rates debt first. The only time not to overpay your mortgage is when you have other debts which are more pressing because they have higher interest rates. If you have any credit card debt at upto 17%, this should be paid off – because when you have finished paying off, you will have more disposable income to put towards mortgage payments. (see more tips for saving money)
  • Getting best mortgage deal. It sounds obvious to look around for the best mortgage deal, but it is worth spending the time to investigate options from a range of options. Mortgage comparison sites can help make a start. But, be prepared to do some of your own research. In particular, don’t think that once you have got your first mortgage you can relax and leave it. You need to be ready to investigate current options, as soon as your mortgage contract expires. If you are not proactive, you will end up on your lenders more expensive SVR – lenders take advantage of lazy mortgage holders. If you keep fighting for the lowest mortgage deal, your existing mortgage dealer will offer their best deal. The mortgage market isn’t quite as competitive as it has been in the past, but there are still substantial mortgage savings to be had.
  • Use power of parents. If your parents are receptive, you might be able to use their savings as collateral to reduce mortgage payments. In some circumstances, you could even get a mortgage in their name to benefit from lower interest rates available to people with bigger mortgages.


What about if you’re struggling to meet monthly mortgage payments and stay afloat?

If you have extra money, you can concentrate on paying off mortgage early. But, if economic circumstances, you may struggle to meet the minimum monthly mortgage payments. In this situation you could consider

  1. extending mortgage term
  2. Temporarily switching to interest only mortgage

Both these options will increase total cost of mortgage, but it is better to give yourself a bit of breathing space rather than default. If you are still struggling speak to your mortgage company – before missing payment. They may be more understanding than you fear. Remember it is in their interest to avoid default too.