Cut the cost of your mortgage! - Video script

John Fitzsimons looks at three easy ways to reduce how much you are forking out on your mortgage each month

The recession may be officially over, but for many of us things are still a little tight financially. If your bills are starting to get a bit much, don’t panic – there are ways of cutting how much you spend on your mortgage each month.

Try to remortgage

If your existing mortgage is a bit punishing, then the obvious first option should always be to move to an alternative deal which will work out cheaper. The remortgage market has picked up in recent months, with decent deals launched on an almost daily basis.

However, most deals require you to have at least 10 per cent of equity built up in your property, which may be a problem with many properties hit by falls in price over the last couple of years. The more equity you’ve got, the cheaper the deal will be.

Extend your mortgage term

If moving to a cheaper alternative deal is not an option, then you should consider speaking to your lender about extending the term of your mortgage.

By changing your mortgage term to 30 years, or perhaps even longer, you will reduce the amount you hand over each month. However, this does mean that you will end up paying substantially more in the long run, and it will also take you longer to build up a decent equity stake in the property.

Switch to interest-only

Most lenders will allow you to switch your repayments to an interest-only basis, though this should only be seen as a short-term measure, to buy yourself a little time.

On the plus side, it will give you a bit of breathing space, as your monthly mortgage payments will fall quite substantially. However, while you are paying off the interest, the debt you owe on the capital side of the mortgage still needs to be paid in the long run, so you are really just postponing the payments. This is not an option that should be taken up lightly.