Finding it increasingly tough to meet your monthly mortgage payments in light of rising costs? Don’t let things get worse… extending your mortgage term may be a possible solution.

With the cost of living going up, you may be worried about your ability to pay your mortgage and bills over the coming months. It’s important to seek advice if you’re concerned rather than doing nothing.

If you’re on a tracker rate mortgage, which is affected directly by base rate rises, your payments will have increased recently. If you’re on a standard variable rate you would likely have also seen your lender increase the rate of interest you pay.

We recommend speaking to an experienced mortgage broker to see if you can switch to a fixed-rate mortgage deal. This would at least offer you peace of mind if there are any future interest rate rises, as your monthly payments would stay the same regardless of base rate rises. This would make it easier to manage your budget.

Another option if you’re struggling financially is to consider extending the mortgage term. This may be possible depending on your age and personal circumstances, so long as you have a repayment mortgage.

The longer the term of your mortgage, the lower the monthly repayments. However, the more time you have to pay it off, the more interest you’ll pay in the long term. The less time you have to pay it off, the less interest you’ll pay overall.

More flexible mortgages

It’s important to know that mortgages are more flexible these days, so you’re not just stuck with the same loan until it’s paid off. Historically, 25-year mortgage terms were fairly standard, but now there is a wide range of options. Some first-time buyers are even choosing mortgage terms of 35 to 40 years, according to Clear Score.

Even if you choose to extend your mortgage term now, it’s not necessarily a permanent situation. For example, you might choose a fixed-rate mortgage deal due to end in the next two to five years. At the end of that term, you can switch to a new deal with a different rate and term.

Incidentally, most fixed-rate mortgage contracts allow you to make overpayments. These are usually capped at 10% of the outstanding balance of the mortgage each year. A borrower might choose to extend the term to reduce their contractual payments but then make overpayments to effectively pay down the mortgage balance just as quickly. When a borrower makes an overpayment, the mortgage balance is reduced by the amount of the overpayment itself, so no interest is charged.

Act fast if you’re worried

If you are looking to extend your mortgage term, it’s important to act swiftly and don’t wait until you’ve missed payments. Lenders are unlikely to let you change the term if you’re more than a month in arrears with your payments. You’ll also need to ensure the term won’t be extended past the 75th birthday of the oldest borrower.

In short, if you are worried, there are likely to be options. We’re here to help. Contact us today for mortgage advice.

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