1. Extend the Mortgage Term
This will reduce the monthly payments, although as you are borrowing for longer you will end up paying more interest in total in the long run. Consider extending the mortgage if you switch from endowment to repayment as this will reduce the payments even more.
2. Endowment Policies
If you have an endowment policy rather than a repayment mortgage, you could reduce the monthly payments by surrendering your policy and switching to a repayment mortgage.
- Compare the cost of a repayment mortgage with what you are paying for the endowment mortgage (both insurance policy and interest).
- Contact the insurance company that issued the endowment policy and ask how much you would get if you cancelled the policy (the surrender value). When you have this figure seek independent financial advice - perhaps from the financial advisor you had when you took out the policy if you trust them.
- If the repayment mortgage monthly payments are less than the combined payments of interest and the endowment policy premiums, then it will probably be best to switch. There will also be a lump sum from the cancellation of the insurance policy, which you can use to help pay off your high priority debt repayments.
3. Repayment Mortgages
If you have a repayment mortgage, you could ask your lender to accept a monthly payment which covers only the interest part of the normal monthly payment. This may be acceptable to them if the cause of your problems are temporary, such as unemployment or short-term illness.
However, bear in mind that in the early stages of a repayment mortgage, the interest makes up the majority of your monthly payments. This means that the more recently the mortgage was taken out, the smaller the reduction in the size of the monthly payment an interest-only deal will be.
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