mortgage advice to reduce payments

[pbsmooth]

we went down from two salaries to one salary (woe is us I know) and now expecting a baby, so partner won't be going back to work any time soon. she looked for work but is now getting too close to due date.
the mortgage payments are just about manageable but not much to spare and of course something expensive is on the way...
is there a way to reduce mortgage payments? could we go to interest only? I am not sure if the fact our income has halved would mean we can't get remortgage as we wouldn't be eligible for our existing mortgage on the one salary. we did a 3 month break during covid already but could do with something for 12 months+.
any help appreciated, I am paranoid about speaking to bank and somehow stitching ourselves up!

 

[platinumsage]

First port of call would be switching to a different mortgage deal (that has a better rate) with your existing lender, this isn't a remortgage and shouldn't require an income check etc, just a few clicks (or a phone call if their website is shit).

 

[Monkeygrinder's Organ]

Remortgage with a longer payment term? A mortgage broker would be happy to speak to you for free and it wouldn't flag anything on a credit report.

 

[pbsmooth]

I don't think we can go any longer due to age

First port of call would be switching to a different mortgage deal (that has a better rate) with your existing lender, this isn't a remortgage and shouldn't require an income check etc, just a few clicks (or a phone call if their website is shit).

see I didn't even know I could switch online myself... thanks, will have a look.

 

[MBV]

Switching product would also depend on when your initial term is up. Your LTV ratio may have also improved which would allow access to a lower rate.

 

[nottsgirl]

Talk to your mortgage provider? I have no idea really.

 

[StoneRoad]

Try the govt's free Money Advice Service ?

Usual method of reducing the cost of mortgage payments is to extend the term, or go to interest only (personally, I would avoid doing the latter if you can).

Do you have both life assurance and mortgage protection insurance or similar policies ?

When I lost a job through redundancy and couldn't get another job thanks to the recession (my employer went bust in 2008) the MPI paid out for a year, so six months more than the dole.

 

[Kevbad the Bad]

I don't think we can go any longer due to age

Even a couple of years extension would help.

 

[kalidarkone]

When I became a full-time student at 42, I went to interest only for a few years. Its certainly worth investigating.

 

[Teaboy]

Certainly speak with your current mortgage provider in the first instance. You need to find out whether you can change your mortgage or whether there will be an early repayment charge. If you are currently in some sort 2 or 5 year agreement there may well be a charge which will almost certainly be unaffordable so renders every other action pointless.

If you can leave your current deal without a charge see what is available with the current provider but also speak to an independent advisor. They won't charge anything unless you process with a new mortgage and even then the charge may be low as they get most of their commission from the new mortgage company. The loan to value of the property is absolutely crucial here because you may be able to get a much better deal just because your home has gone up in value since you brought it.

Look out for 2 or 5 year fixed deals. These can often be much lower interest but will mean you are locked in for that period but at least you'll know your monthly repayment will stay the same. Be careful of trackers at the moment inflation is spiralling and interest rates will inevitably respond soonish.

If you and / or your partner have a pension fund of any note (and are still paying in) mention that because that can be taken into account when extending mortgage length beyond standard retirement age.

Interest only is certainly an option but be aware you will likely be paying a higher rate of interest then you would in a repayment mortgage (though your actual monthly payments would be lower) so you are effectively borrowing from your future self. Don't get too used to interest only either as your future self will not thank you for it.

ETA: Whilst there is a place for interest only mortgages I do think it should be considered as a last resort. Its basically just like buying on credit, the never the never etc and relies on house prices only ever going up.

 

[Supine]

I don't think we can go any longer due to age



see I didn't even know I could switch online myself... thanks, will have a look.

if yr having a baby age shouldnt be an issue. I would say its ok to talk to a mortgage advisor and / or your bank. It shows you are being proactive about your finances which is good.

 

[pbsmooth]

ok thanks, will give them a ring today. we are in 5 year fixed now so there will be a charge but looking online if I get the best deal that seems to be on offer, it would still save a few grand over a couple of years if we switched to a better deal. thanks

 

[pbsmooth]

wow the charge for coming out of the fixed deal was HUGE! so that was a non-starter. they suggested extending the length is only bet, as mentioned above, so thanks for that

 

[MBV]

When is your fixed deal up? Can you hang on until then?

 

[Teaboy]

wow the charge for coming out of the fixed deal was HUGE! so that was a non-starter. they suggested extending the length is only bet, as mentioned above, so thanks for that

Yeah, I remember looking at mine recently and it was like 7% of the overall loan value or something crazy.

 

[pbsmooth]

fixed is for another 2 and a bit years. if I lengthen the term of mortgage, presume that doesn't change when the fixed term ends? if not that looks best option. can reduce payments for couple of years or so by extending the term and then hopefully when we remortgage at end of the fixed term we can undo some of the interest damage by upping the payments again.

 

[Teaboy]

fixed is for another 2 and a bit years. if I lengthen the term of mortgage, presume that doesn't change when the fixed term ends? if not that looks best option. can reduce payments for couple of years or so by extending the term and then hopefully when we remortgage at end of the fixed term we can undo some of the interest damage by upping the payments again.

Good question and probably one for your mortgage provider. At a guess I'd say you are renegotiating the terms of an existing mortgage so unless the mortgage provider says otherwise all other terms would stay the same.