How to pay lower mortgage instalments? 6 tips for 2025

When you take out a mortgage, you are choosing to make a very serious commitment. You may be paying it for the next 25 years and there is a good chance it will affect many other purchases in your life. You may find that you will have to deny yourself many pleasures, especially if you are committed to repaying your home early. In today’s article, we’ll look at how to pay less in mortgage instalments and, in turn, get more enjoyment for whatever you want.

We’ve split our article into two parts - in the first we’ll look at people who already have a mortgage, while in the second we’ll give tips for people who are just planning to buy their home.

I already have a property in the UK - how to pay lower mortgage instalments?

Let’s first get those who already have a mortgage and would like to pay lower instalments on it:

Changing banks (remortgage)

Banks’ offers change all the time and depend on many factors. The interest rate on a mortgage is derived both from the market situation (base rates, current demand for mortgages) and from your capabilities (credit score, amount of deposit, earnings).

Even if you chose the best possible deal 5 years ago, your mortgage may be mediocre today. For this reason, you should regularly check the products available and be aware of the possibility of switching to a better product. Remortgaging involves a certain amount of paperwork and costs (usually several hundred pounds), but it is a way to clearly reduce your interest rate and therefore make big savings.

By taking the help of the advisors atExtend Finance, you will go through the whole processin a matter of weeks. What amounts of savings are we talking about?From tens to even hundreds of pounds per month. Of course, you’ll only know the exact sums once you’ve taken all the variables into account.

Overpaying your mortgage

If for some reason you can’t do a remortgage or it’s not cost-effective, it’s worth thinking about overpaying your mortgage. How does this work?

Your mortgage instalments depend on both the amount of capital borrowed and the interest. With repayments spread over 25 or 30 years, a large part of the total commitment is interest. How large? Let’s use a simple calculation for this:

James has bought a property worth £200,000 and has already paid off half of his mortgage - he has £100,000 left - and he has 15 years to go before he pays the final instalment. He recently got a small pay rise and an extra £5,000 has appeared in his savings account - how can he use it?

Option #1 : Do nothing: Option #2: One-off payment of £5,000: Amount of instalment: £882.14 £838.03 Potential savings (If interest rates remain unchanged): 0 £7 939,8 APRC: 6,7%. Source of interest: HSBC, Mortgage calculator: Moneyhelper

As you’ve probably noticed by now, overpaying your mortgage is very beneficial. By paying instalments that are £44 lower, our protagonist will reduce his monthly outgoings and therefore have more money left over. Of course, the amount of the instalment could change if the Bank of England introduces an interest rate rise or cut. However, if Jacob’s mortgage is at a fixed rate, the annual saving will be more than £500 (until the repayment terms change).

It is important to remember that banks usually allow a maximum overpayment of 10% of the outstanding mortgage balance per year. In this case, this is £10,000 - if the overpayment exceeded this figure, James would likely have to pay an Early Repayment Charge, which would reduce his benefits.

Changing your insurance

Although your insurance premium doesn’t translate directly into your mortgage instalments, it is an additional and compulsory cost that you need to be aware of. Statistically, an Average Building Only home insurance policy costs £228. This may not seem like a large amount compared to the instalments you are paying, but you can save some cash on your insurance too.

If you want to see if you can save money on your insurance, be sure to get in touch with us. We’ll do a review of your insurance together.

I want to buy a property in the UK - what can I do to keep my mortgage instalments low?

Let’s now consider what to do to make your future loan as beneficial to you as possible.

Find a good mortgage broker

When taking out a mortgage, you can either use a broker (adviser) or go directly to the bank. The main difference between the two solutions is the choice of offers. By coming to the bank, you have access to products offered by one particular company. There may be several, but the choice will be quite limited. By choosing to work with a broker, such as Extend Finance, you gain access to hundreds of different mortgages offered by a huge pool of banks - both local and international.

The services of a mortgage adviser are not free - in our case they involve a fee of £500-£600, but this expense should be seen as an investment. Our clients always receive information from us about the cheapest solutions, which usually saves a much larger amount.We would also add that with a 25-year facility, a £500 fee translates into less than £2 per month.This is a really small cost compared to the mortgage instalments you will come to pay.

Take out a mortgage for as short a term as possible

In the example we used earlier, we showed that the repayment period has a huge impact on your mortgage instalments and the total amount you have to pay back. Even a year shorter duration will leave you with hundreds of pounds in your pocket to spend on any purpose.

On the other hand, you need to remember the financial strain that comes with a shorter duration of repaying your home. Your mortgage instalments will be higher (after all, you have to pay back several hundred thousand pounds in a shorter period of time), but in return you will gain full financial independence sooner.

It’s worth talking to yourbrokerabout the term - together we’ll find the golden mean between low mortgage instalments and a low total cost of financing your home.

Find a cheap and good solicitor

Legal costs (conveyancing) are not cheap - in many cases they exceed £2,000. That’s a big expense that you can’t fund with a mortgage, so it’s worth taking the time to find the cheapest possible solution.

Unless conveyancing has a direct bearing on your mortgage instalments, you can get help from a mortgage adviser on this too.Extend Finance has already helped many clients to choose good law firms. In addition, a special search engine of solicitors will soon be available on our website so that you can immediately compare the prices of their services.

Summary

As you might have noticed, there are many ways to reduce your mortgage instalments. However, remember to take into account which option will be most beneficial in your situation. By doing so, you will save a lot more money than you may have originally anticipated. It’s worth keeping this in the back of your mind, especially at a time when the market is constantly changing, so cutting back on spending at every possible opportunity certainly pays off.

If you’re interested, get in touch and we’ll do everything we can to make sure you’re as satisfied as possible.