19th May 2023

Lower your mortgage interest rate without refinancing

For many homeowners, their mortgage payments are their largest monthly expenses. With the current cost of living stretching budgets even further, many people are looking for ways to reduce their mortgage interest rates to make their payments more affordable. In this blog post, we answer the common question ‘can you lower your mortgage interest rate without refinancing?’ and list some alternative options.

Why are homeowners looking to lower their interest rates?

Alongside making monthly mortgage payments more affordable, there are a couple of other reasons why someone may want to reduce their mortgage interest rate.

First, reducing the rate can help you to pay off your mortgage faster, as it lowers the amount of interest you pay over the life of the loan and means more of your money is going towards paying off the total sum of your mortgage.

The second reason is to free up cash for other expenses, such as bills, home improvements, savings or paying down debt.

When is refinancing not a good option?

While refinancing your mortgage is one way to lower your interest rate, it's not always the best option. Refinancing comes with a number of costs and fees, which can add up to thousands of pounds. In addition, refinancing may not be possible if your credit score has decreased since you first took out your mortgage or if you've experienced a drop in income.

Can you lower your mortgage interest rate without refinancing?

Fortunately, there are several ways to reduce your mortgage rate without refinancing. Here are some options to consider:

1. Make an extra mortgage payment each year
   
   One of the simplest ways to reduce your mortgage interest rate is to make an extra mortgage payment each year. By making 13 mortgage payments instead of 12, for example, you'll effectively reduce your mortgage rate by 1/12th. This will also help you pay off your mortgage faster and save money on interest over the life of the loan.


2. Refinance just a portion of your mortgage
   
   If you don't want to refinance your entire mortgage, you may be able to refinance just a portion of it. This is known as a "cash-in refinance" and it involves using savings to pay down a portion of your mortgage balance. By doing so, you may be able to qualify for a lower interest rate on the remaining balance.


3. Improve your credit score
   
   Your credit score plays a big role in determining your mortgage rate. If your credit score has improved since you first took out your mortgage, you may be able to negotiate a lower interest rate with your lender. Some steps you can take to improve your credit score include paying down debt, making payments on-time and disputing any errors on your credit report.


4. Pay for points
   
   Paying for points is another way to reduce your mortgage rate. Points are essentially prepaid interest, and each point you pay typically reduces your mortgage rate by 0.25%. While paying for points will increase your upfront costs, it can save you money over the life of the loan if you plan to stay in your home for a long time.


5. Consider a loan modification
   
   If you're struggling to make your mortgage payments, a loan modification may be an option. A loan modification is a permanent change to your mortgage loan and it tends to involve reducing your interest rate, extending your loan term or changing your loan type in order to make your mortgage payments more affordable.

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Other ways to deal with high mortgage interest rates

If none of the above options work, there are a few other ways to deal with high mortgage interest rates. If you are not in the position to reduce your interest, then some of the alternative ways you can potentially save yourself some money include:

1. Overpaying
   
   You should always check the terms of your mortgage first, but if you can afford to, overpay on each instalment. This means that you will finish paying off your mortgage sooner, which will reduce the amount of interest that you pay over time.


2. Checking for better deals
   
   When you’re nearing the end of your current mortgage deal, make sure to shop around and see if there are any better deals available with different lenders. More often than not, you’ll get a better deal with a new lender. However, just be wary of any switching fees you may have to pay as these may mean you don’t actually ending up making significant savings.


3. Asking the professionals
   
   If you are unsure about the best course of action for you, then we’d advise seeking expert help from a mortgage adviser. Our team at WIS Mortgages is on hand to assess your situation and provide tailored guidance.

Looking for more advice?

If you’re looking to lower your mortgage interest rate but don’t want to refinance, get in touch with us at WIS Mortgages. We’re happy to provide some free initial advice, and you can also use our mortgage calculators to see what options are available to you.

We also have an accountancy arm, WIS Accountancy (accountancy is not regulated by the FCA), and an insurance arm, WIS Business Protection, Wealth and Pension, so we can support you with a whole range of issues. If you have more questions like ‘can you lower your mortgage interest rate without refinancing?’ or would like advice on your specific circumstances, speak to us today.

As a mortgage is secured against your home/property, it may be repossessed if you do not keep up with the mortgage repayments.

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