Managing mortgage payments in the UK can be a challenging task on its own, but it becomes even more difficult during periods that require more than usual expenses, such as festive seasons. Whether it be an unforeseen emergency or seasonal, knowing how to navigate during high expenditure times while juggling mortgage payments can help you get through a difficult financial time.
Understand your finances
The first step to managing your mortgage payments is to assess your finances and create a budget. It might seem somewhat of a vague exercise at the beginning, but this will help you track your income and expenses. There are many online apps you can make use of, for expense and budget monitoring and they are usually downloadable for free. If you’re not a tech savvy person, simply jotting your daily expenses down on paper will do just as good.
Once you have a budget monitoring system in place, you can divide your expenses as priority and non priority expenses. Your priority expenses will be mortgage payments, utility bills, groceries and possibly medicine prescriptions. Whilst non priority could point to not so important expenses such as entertainment, comfort food, a family trip, etc.
Cut back on your expenses
If you know you’re headed for a time of increased expenses, prioritising and cutting back on some of your expenses ahead of time can help you save up to help manage your monthly mortgage payments. Once you’ve had your expenses sorted out, you can go ahead and make better and informed choices on your monthly expenditure.
Prepare lists of what you need
Impulse purchasing is one reason many find it difficult to cut back on unwanted or non prioritised spending. Making a list of what you need is a great way to stop yourself from making impulsive purchases. Shopping for groceries at a department store without a list can lead you astray from buying your priority items. A list helps you to stay on track and focus on the needs rather than your wants.
Make use of discounts and other budget friendly avenues
Keep an eye out for discounts from stores. You can also use loyalty programs that provide special offers and use thrift stores to keep your purchases under budget. This is a popular method to maximise your money spending in the UK.
Get rid of or downgrade your subscription packages
Chances are you have some routine expenses on things that you might not even use anymore. Check your subscriptions, magazines and/or apps and get rid of any that you do not use. You can also look into downgrading your mobile phone and broadband plan to more affordable options. It also might be a good idea to look for special offers during the festive season for discounted subscription plans.
Minimise your online shopping
Shopping online is the easiest way to fall down a rabbit hole of impulse buying. A good option is to give yourself a couple of days to consider the purchase before going out right and buying it as you see it. You can also make the online experience less easier, by not saving your information on the site you wish to purchase from. This makes you have to enter your details for every purchase which in itself can act as a deterrent for any impulsive buying.
Set up an emergency fund
As a general rule of thumb 20% of your income should be used for your savings and your savings as a whole should be able to cover the cost of 3 to 6 months of your living expenses. When you have a mortgage, it is crucial that you have savings to tide you over in times of an emergency. Ideally you would want to have this type of savings in a high interest savings account.
You can also help boost your savings by setting up an automatic scheduled transfer. This makes the process easier as well as ensures that your monthly savings are always growing.
If you’ve got a bit of spare money to set aside, put it up in a termed deposit or a fixed deposit. Depending on the bank’s interest rates, you could time your deposit release period to coincide with a high expense period (i.e in December). This extra money could help you with your repayments for the mortgage.
Look for alternative income streams
When times are tough increasing your income is the best way to stay ahead with your mortgage payments. In the UK there are several options you can use as alternative income streams to help you during tight periods.
Rent out a spare room
You can make use of the rent a room scheme in the UK which allows you to rent out a spare room in your home. Under this scheme you can earn up to £7,500 per year in rental income without tax. If you’re on rent you can still make use of this scheme if your tenancy allows it.
Sell/rent your things
If you have items that you no longer need, you can look into selling them. Items of value include electronic equipment, books, clothes, cutlery and crockery. Or if you have items such as academic books, party tents, drones, campervans or tools you can consider renting them out.
Make use of your skills
If you have any special talents like baking, cooking, crafts, sewing or anything similar, you can look into selling these skills at local community centres or online. Similarly you can try freelance work in areas such as copywriting, graphic designing, education, web development and accounting through freelance websites or social media. You can alternatively earn an income by teaching these skills through online learning communities.
If you’re in a really tight space, remortgaging to a cheaper deal could be an option. This is mostly useful if you're close to the end of your mortgage term, if your property has increased in value or you’ve built equity in your property.
When you have built enough equity and/or your property has increased in value it lowers the LTV. A lower LTV makes you eligible for lower interest rates. However remortgaging also comes with other fees such as arrangement fees and legal fees which you need to consider before remortgaging. If you are remortgaging before your term comes to an end you may also have to pay early repayment charges. Check with a mortgage adviser before you decide on a remortgage. Speak to one of our many expert mortgage advisers at BVS Mortgages & Financial Services Ltd.
Make an overpayment
An overpayment is when you pay extra on your mortgage. Usually this is done by agreeing to pay extra on your monthly repayments or by paying a lump sum. In the case of preparing for high expense periods, paying a lump sum can go towards reducing your monthly mortgage payments in the future. Your adviser can help you look into this, and also whether your lender levies any charges for making overpayments.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
* Approved by The Openwork Partnership on 29/01/2024