Cut your mortgage costs

This year, many of us will be thinking about ways to cut our regular outgoings. And for most, there’s no larger monthly bill than our mortgage repayments.

So how can we cut our mortgage costs?

Shorten your mortgage, don’t lengthen it

On average, it takes us more than 30 years to repay our mortgages. Many of us extend our mortgages when we remortgage, from the 23 years remaining back up to 25, for example. While this can make the monthly cost a bit more manageable, you pay for it in much greater debt interest costs.

Instead, you should be considering enforcing more discipline on yourself. Think about reducing your mortgage whenever you remortgage, so that you pay it off more quickly and cheaply.

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Rather than reducing the mortgage length, you could take advantage of any flexibility your deal offers you to overpay without penalty. Paying an extra €500 of debt off over 2013 will save you just a dozen or so euros in interest over the year, but thousands over the remainder of your mortgage.

Cancel pointless insurances

Check that you’re not paying for insurances you don’t need. Many homeowners have indiscriminately been sold life insurance to protect mortgage payments, but if you have no family to fend for if you were to die young, you’re probably paying unnecessary premiums.

We have also been paying for hideously overpriced mortgage payment protection insurance every month. This is supposed to protect your repayments for a year if you suffer an accident, illness or unemployment, but the premiums are usually a rip off and the contract full of exclusions.

Consider either stand-alone insurance providers, who are much cheaper and usually offer slightly better terms.

Prioritise your mortgage

If you’re having financial difficulties, it makes sense to prioritise your mortgage repayments, along with secured loans, gas and electricity, hire purchase, taxes and your TV licence. These come before other debts because you can either be imprisoned for them or you can lose your home more easily than with other debts. Losing your home is not a good way to cut your mortgage costs!

If you can’t afford your mortgage even after making cutbacks elsewhere, you should immediately contact your lender. It’s very clear from former debtors and debt advisers that most of the time it works out well for you to communicate openly and honestly with your creditors, and as quickly as possible. Tell your lender that you’re seeking debt advice from Mabs or Citizens Advice – and do so straight away.

The final word

A mortgage is not just for the next 12 months. Try not to get too carried away with guessing what you think will happen over the next 12 or 24 months, and plan for the long term. This will give you greater financial security.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an independent regulated broker, before acting on anything contained in this article.

Warning: Your home or property may be repossessed if you do not keep up repayments on your mortgage or any loan secured on it.