How to cut the biggest bill of them all … your mortgage
Spiralling energy, food and petrol prices, amid warnings of a recession, mean most households will be thinking about how to keep other costs as low as possible. So what should homeowners do about their biggest monthly outgoing – the mortgage?
Here are some of the ways you could trim it back.
In March 2020 all banks were told by the government they needed to offer any customers who asked for one a break on repayments of any loans, credit cards and mortgages of up to six months, to help alleviate some of the financial pressures people faced during lockdown.
While this scheme came to an end last year, you can still contact your mortgage lender and ask for a payment holiday if you are concerned about how to meet monthly bills. Whether it is granted or not is now at the lender’s discretion. If they do offer you a break it would typically be for about six to 12 months.
“If you are ever struggling with repayments, always get in touch with your lender at the earliest opportunity,” says Brian Murphy, head of lending at the Mortgage Advice Bureau.
“They are required to exercise forbearance and to do whatever they can to help you through a difficult financial period. ”
There are major downsides to taking a payment holiday, however, so treat it as a last resort.
Even if a bank approves your application for a short break, brokers warn it will show on your credit file that you have not met your monthly repayments. This could damage your ability to remortgage, or take out other types of loans for years to come.
Banks will also only be offering a pause on repayments, not writing them off, which means once the holiday is over your monthly bill will be higher than it was before, to make up for repayments and interest the bank has missed.
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