Martin Lewis on how mortgage holders can save ‘thousands in interest’ on their repayments

Martin Lewis offers advice on how to decrease mortgage interest

When you subscribe we will use the information you provide to send you these newsletters.Sometimes they’ll include recommendations for other related newsletters or services we offer.Our Privacy Notice explains more about how we use your data, and your rights.You can unsubscribe at any time.

Martin Lewis was on This Morning today as he took questions live. The Money Saving Expert addressed various concerns on insurance and landline deals but he was also questioned on mortgages.

A woman named Lorraine rang in and detailed her son had a lump sum available and she was wondering if he should use it to pay off his mortgage to reduce the term or, if he should increase payments instead.

Martin responded with the following: “They’re both effectively the same thing.

“So the key to a mortgage, there are two functions that are the costs of the mortgage, the interest rate and how long you’re paying it for.

“The longer you’re paying it, the more the interest adds up, and adds up, and adds up.

“So, you want to reduce the amount of time that you’re paying by reducing the term.

“If you overpay, what they may do is instead of reducing the term, they may say instead of having to pay £500 a month every month in the future, you only have to pay £300 and keep the term the same.

“So if you can afford to overpay you want them to reduce the term, because that reduces the total amount of interest, so pay off as a lump sum but make sure they count it as a capital repayment.

“Ask them to reduce the term on the back to keep what you were paying before the same, and you’ll save thousands in interest.”

UK property market: Buy-to-let landlords brace themselves for tax hike [INSIGHT]
Martin Lewis warns of ‘inertia dividend’ costing you hundreds [WARNING]
Martin Lewis breaks down pension consolidation options – be careful

Mortgage holders can benefit from repayment support at the moment as payment freezes, or holidays, can be claimed for up until March 31.

Consumers who are struggling with their finances can request a payment holiday on their mortgages for up to six months in total, but lenders can only agree to a payment holiday of up to three months at a time.

Where mortgage holders have already taken a payment holiday, lenders should contact them before it ends to see if additional help is needed.

Additionally, where a person is coming to the end of their holiday and are still experiencing difficulties, lenders are required to provide tailored support under FCA rules.

Mortgage holidays were among the first support measures offered by Rishi Sunak as coronavirus emerged.

As 2020 progressed, a number of these support measures were altered and as mortgage holidays were extended in November Sheldon Mills, the interim Executive Director of Strategy and Competition at the FCA, recognised the need for additional support: “Today we have confirmed further support for borrowers struggling financially as a result of coronavirus.

“The announcement we have made today, ensures that the support offered through payment deferrals is as flexible and accessible as possible.

“This means borrowers will again be able to access payment deferrals up to a maximum of six months.

“However, if you are able to keep paying it will be in your best long-term interest to do so. Payment deferrals should only be taken when absolutely necessary.”

As it stands, mortgage holidays can be utilised into July 2021.

However, there has been no confirmation that they’ll be extended beyond this.

The Chancellor will be laying out his Spring Budget next week and many expect coronavirus support measures will be extended which on top of mortgage breaks, could also include the furlough scheme, SEISS and Universal Credit uplifts.

Do you have a money dilemma which you’d like a financial expert’s opinion on? If you would like to ask one of our finance experts a question, please email your query to [email protected] 

Source: Read Full Article