How to make your mortgage more affordable

In the current financial climate, you might be worried about the future cost of your mortgage - whether you’re a homeowner coming to the end of a fixed term or if you’re looking to purchase your first property.

The impact of consecutive interest rate rises, and the cost-of-living crisis has been well-documented, with mortgage rate rises amounting to thousands of pounds in additional expenditure for households across the country.

However, there may be better news on the horizon: after 14 consecutive rate rises, the Bank of England’s most recent interest rate review in November 2023 kept the interest rate at 5.25% once again after their initial pause in September, increasing the likelihood of some lenders reducing their mortgage rates in alignment – very welcome news for homeowners and first-time buyers.

With hundreds of thousands of homeowners expected to come to the end of a fixed term mortgage product before the end of 2023, it’s a good time to consider what options are available to you, to make your next mortgage product as affordable as possible.

If you’re concerned about the cost of owning a home, the independent mortgage advisers from ESPC Mortgages have given us their top tips on making your mortgage more affordable.

Use a mortgage adviser

Employing the services of an independent mortgage adviser is one of the best things you can do to be sure you’re accessing the best mortgage (and the best affordability) for your individual circumstances. A good mortgage adviser will assess your finances and circumstances, and tailor their advice to your personal needs.

ESPC Mortgages use an in-depth questionnaire in the first instance, to ensure that the advisers can fully understand your needs and your affordability. The questionnaire includes a budget planner, and looks at your salary, outgoings, dependents, and other expenses, to help you understand what you realistically have available to spend on a mortgage payment each month. It’s easy to forget about changes to commuting costs, council tax costs or increasing bills if you’re moving to a new or larger property, all of which can affect your affordability, so the planner helps you to keep track of the expenditure you expect to have.

This is a key first step in making sure that you fully understand your monthly budget and how much of a mortgage you can afford to take out, and applies whether you’re a first-time buyer, or a homeowner looking to remortgage.

Buy a fixed price property

If you’re a first-time buyer, or if you’re moving to a new property, choosing to purchase a home that’s marketed at a fixed price could be a great way to utilise your savings in a way that impacts your mortgage payments.

Currently, under the Scottish system, many properties are marketed at ‘offers over’ a certain price, inviting prospective buyers to bid as much as 20% (and sometimes more!) over the property’s value to secure it – a figure which isn’t covered by your mortgage amount. This system means that buyers need to use their own savings to cover their bid, as well as their initial mortgage deposit.

However, if you purchase a home at fixed price, this is likely to be much closer to the property’s Home Report valuation and means you spend less money on bidding over the value. This in turn means that you can increase the amount of deposit you are putting down, therefore decreasing the loan-to-value, or the amount of money you need to borrow from your mortgage lender, meaning your monthly mortgage payments will be lower.

Bid cleverly

In the current market, properties are generally selling for much closer to their Home Report valuation than they were even a year ago. After the frenzy of the property market in the last three years, the market is levelling out and according to ESPC’s latest House Price Report, properties are selling for 104% of their Home Report valuation, down four percentage points on last year.

In essence, this allows you to offset the cost of higher monthly repayments, as you can use more of your savings to contribute to your mortgage deposit. You could even keep some savings aside to put towards monthly mortgage payments.

So, if you see a property you like, speak to the selling agent, your solicitor estate agent, and your mortgage adviser to get an idea of the local market, so that you can make a confident bid that works for your financial circumstances. Check out ESPC’s latest House Price Report for the most up-to-date data on market trends too.

Extend the term of your mortgage

It’s not ideal, but if you think you may struggle to meet higher repayment rates, then extending your mortgage term may be helpful as a short-term measure. Extending the mortgage term means that you will pay more money over the lifespan of the mortgage, but it does mean that monthly payments can be lowered to keep them affordable.

If your circumstances change and you can afford to pay more in the future, then you should consider reducing the mortgage term to avoid the extra years of interest repayments. Again, a mortgage adviser can guide you on whether this is a measure that could be beneficial to you.

Move to a cheaper home

It may not be your first choice, but if the circumstances mean that your monthly repayments are going to cause huge stress or financial difficulties, then moving to a more affordable property could improve the situation. Relocating to a smaller home, or to a cheaper area could reduce your monthly outgoings. Of course, this isn’t an ideal scenario and is something most homeowners would want to avoid, but if you’ve been thinking about moving home recently, consider if the time is right for you to take the plunge.

Find out more

ESPC mortgages offer expert independent mortgage advice in Edinburgh. Whether you are looking for first time buyer mortgage advice, are interested in finding out more about buy-to-let mortgages or would like to re-mortgage, get in touch with the team on 0131 253 2920 or fsenquiries@espc.com.

The initial consultation with an ESPC Mortgages adviser is free and without obligation. Thereafter, ESPC Mortgages charges for mortgage advice are usually £395 (£345 for first-time buyers). YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED AGAINST IT.

The information contained within this website is subject to the UK regulatory regime and therefore restricted to consumers based in the UK.

The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren’t able to resolve themselves. To contact the Financial Ombudsman Service, please visit www.financial-ombudsman.org.uk.

ESPC (UK) Ltd is an Appointed Representative of Lyncombe Consultants Ltd which is authorised and regulated by the Financial Conduct Authority.