5 ways to pay less for your mortgage

Given that your mortgage is probably the biggest loan you will ever take out, you'll no doubt want to keep the cost of it as low as possible. So here are five ways to help you on your way.


1. Switch to a  cheaper deal

First of all, if your existing mortgage is about to end, or you're currently sitting on your lender's standard variable rate (SVR), it's time to shift to a more competitive deal. Mortgage rates are at record low levels and, as a result, you could save yourself a tidy sum of money each month by switching to a better mortgage rate.

Those who have built up a decent amount of equity in their home will benefit from the lowest rates. For example, if you have at least 40% equity in your home, the West Brom two-year fixed rate mortgage is priced at 1.48%, reverting to 3.99% after two years. Just watch out for the hefty £2,400 completion fee and £99 booking fee. The overall cost for comparison is 3.9% APR.

If you were paying the current average SVR of 4.32% on a £150,000 repayment mortgage, switching to the West Brom deal would save you £220 a month, or £2,640 a year.

But even if you don't have as much equity in your home, you can still take advantage of low rates. If you have 25% equity in your home, the Post Office two-year fix is priced at 1.98%, reverting to 4.49% after two years. It has a fee of £995 and the overall cost for comparison is 4.2% APR. 

2. Pay more than what’s required each month

Many mortgage lenders permit you to overpay on your mortgage by 10% a year without charging a penalty – even on fixed rate deals. Putting a little extra towards your mortgage in this way will reduce the total amount of interest you pay and help you to be mortgage-free more quickly than you'd planned.

3. Reduce the number of fees you pay

While rates may be lower, the fees attached to mortgages have shot up recently and some now stand as high as £2,500. But by opting for a longer fixed rate mortgage deal, you won't remortgage as often and will therefore pay fewer fees.

For example, if you always took out a two-year fix, over 25 years you would remortgage around 12 times. If you were paying a fee of £1,000 each time, you'd pay £12,000 in total. Yet if you opted for a five-year fix each time instead, you'd only remortgage five times. If the fee was the same £1,000, you'd pay £5,000, saving you £7,000.

You will obviously have to weigh this fee saving against any extra you may fork out interest should rates fall during your fixed rate terms. But, for now at least, it’s safe to say rates are at rock bottom. And of course if they rise during any one fixed rate term, your repayments won’t be affected.

Good five-year fixed rate deals to consider include Yorkshire Building Society's deal at 2.59%, reverting to 4.99% after five years, for those with 35% equity in their home. It has a £1,345 fee and a £130 processing fee (overall cost for comparison is 4.4% APR).

Or Chelsea Building Society's five-year fix is priced at 2.69%, reverting to 5.79% after five years, for those with 25% equity in their home. It has a £1,545 fee and a £130 processing fee (overall cost for comparison is 4.9% APR).

4. Reduce the length of your mortgage

Many borrowers opt for a 25-year term on their mortgage. However, if you reduce your mortgage term, you'll clear your mortgage more quickly and save yourself thousands of pounds in interest. However, be aware that if you do choose to lower your mortgage term, your monthly repayments will go up, so be sure you can afford to do this. You can use our handy mortgage calculator to work this out. 

5. Choose an offset mortgage

With an offset mortgage, your savings and mortgage are grouped together under one provider. You won't earn interest on your savings but, instead, your savings will be set against your mortgage and your total mortgage debt will shrink as a result. This means that you actually save interest, as you pay interest on a smaller amount.

So, if you had a mortgage of £150,000 and you had £50,000 in savings, you'd only pay interest on £100,000.

You can compare a range of mortgages on our mortgage comparison channel.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct

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