Very few people can say that they have remained unaffected by the cost of living crisis in the UK. Many are even struggling to meet their monthly mortgage payments. But there are options that can help you manage your mortgage payments. Find out more about the options available to help you meet your monthly payments.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Options to help you pay your monthly mortgage payments
The government has recognised the difficulty many homeowners are facing and in conjunction with the Financial Conduct Authority have launched the mortgage charter, which most UK lenders have signed up for. This charter enables lenders to offer flexible support to borrowers struggling with payments but have not yet missed one. You have two options if you’re interested in this assistance: interest-only repayments and extending your mortgage term.
Interest-only repayments
The first option you can pursue to help with mortgage payments is to switch to an interest-only mortgage for six months. During this time, you’ll only be responsible for paying the interest portion of your regular monthly repayment, pausing the repayment on the capital portion of the loan, so your monthly payments will be reduced. After the six-month period, your repayments will return to normal, plus a bit extra as you haven’t paid down any capital and your balance remains the same.
There are no affordability checks done when you apply nor are there any at the end of the six months when you need to revert back to full repayment. Plus, there’s no impact on your credit report. How much you can save will depend on the current size and length of your mortgage, but can often be hundreds or even thousands of pounds. The longer you have been paying off your mortgage, the smaller the debt will be and the bigger the payment reduction will be.
Extending your mortgage term
The second option available to help you lower your repayments is to extend your mortgage term. For example, you might extend your 15 year term to 20. Keep in mind, you cannot extend into your retirement. There is no cap on how long your extension can last and in fact, the longer you extend your term, the lower your monthly payments will be.
Similarly to an interest-only option, there is no affordability check with this option and no impact on your credit report. If you wish to reverse your decision, you can do so within six months. However, after six months, while it is still possible to reverse, you will be subject to affordability checks.
Extending your mortgage term will lower your monthly repayments, but usually not as much as switching to interest-only for a short period. However, it is the more flexible option as the decision of how long to keep your extension is up to you.
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The best option for you
If you need short-term help, moving to interest-only might be right for you since it will reduce your payments temporarily. Don’t forget that payments will return at a greater amount so you will need to be prepared for that.
Extending your mortgage term works if you need help short-term, but it is also helpful for longer-term assistance. Payment reduction tends to be less than interest-only, but it won’t add any more to the total cost of your mortgage.
For a full analysis of your current situation and for advice on the best option for you, get in contact with Dental & Medical Financial Services. They will be happy to walk you through your options and find the best deal for you.