Millions of homeowners could be missing out on the chance to take a break from their mortgage repayments.

Last week, comparison firm Moneyexpert urged borrowers to check the terms of their home loans because as many as 58% could be eligible for a so-called “payment holiday”.

At a mortgage summit last month, lenders were urged by the chancellor to let homeowners facing repossession take a break from their payments, but many banks and building societies already offer this option - and you don’t have to be in dire straits to take advantage.

However, there is a sting in the tail - when you take a payment holiday, you are in effect borrowing from the bank and the money is added to your loan, meaning you will pay more in the long run.

Brokers said borrowers looking to reduce monthly outgoings might therefore be better off considering other ways, such as offsetting. This can still knock as much as a quarter off your bill.

Here we explore the options.

1 Take a break

Most lenders will allow you to take a payment holiday for a short time if you have previously overpaid. However, Halifax and Coventry building society will allow you to take payment holidays of six and three months respectively, even if you have not made any overpayments previously.

Your Halifax mortgage has to be at least three months old while Coventry requires at least six months of repayments.

The money you do not pay is added to your overall loan, so you will end up paying more.

If you had a three-year fixed deal from Halifax at 6.22%, you would be paying £1,316 a month on a repayment loan of £200,000 over 25 years. If after three months you wanted to take a six months’ payment holiday, you would in effect add £1,316 a month on to your overall debt as well as the interest.

In the above scenario, you would add about £8,000 to your total loan in six months on which you would pay around £13,400 in interest over the remaining term assuming a standard variable rate of 7%.

At the end of the six months, your monthly bill would therefore increase to about £1,380 for the rest of the fixed term.

Some banks such as the Woolwich, allow you to take payment holidays if you’ve previously overpaid.

To overpay you will need to set up a Mortgage Reserve Account (MRA) when you agree to the mortgage. Once a limit has been agreed on the account, payment holidays will be taken from the MRA account.

For example, if the MRA account is set up with an agreed limit of £1,000 and your monthly payments are £500, you can take two payment holidays during the mortgage term.

Ray Boulger of the broker Charcol recommends that homeowners who think they may run into trouble - City workers who think job losses are on the way, perhaps - should overpay now so they can take a short payment holiday in future.

2 Offset

Most people use offset mortgages to reduce their mortgage term, but some will let you reduce your monthly outgoings if you need a breather.

Offset mortgages work by setting your savings against your borrowings. The money, in effect, cuts the size of your overall mortgage, so you pay less interest. If you had, say, a £200,000 mortgage and £50,000 in a linked savings account, you would pay interest on only £150,000 of the loan.

Although most lenders still require that you pay the same monthly rate, and so in effect overpay, there are some that will allow you to reduce your payments.

They include Coventry, Royal Bank of Scotland and Intelligent Finance.

Coventry, for example, offers an offset deal with a rate of 6.79% fixed for 10 years. By reducing the loan from £200,000 to £150,000, you would reduce your monthly payment from £1,403 to £1,052 on a repayment basis.

Although offset deals tend to have a higher interest rate, you are likely to end up better off, provided you have large-enough savings.

HSBC’s standard tracker, now at 5.48% on a £200,000 mortgage, would cost £913 a month on an interest-only basis. If instead you took out an offset tracker with Woolwich, currently at a rate of 6.29%, you would have the same monthly payments if you had £26,000 in a linked savings account.

3 Borrow more to pay less

Savings rates are now so much higher than mortgage rates that couples could save money by borrowing more and putting it in a high-interest savings account - although one of you would need to be a non-taxpayer to benefit.

Boulger said: “Generally speaking, there isn’t a huge margin between the best savings rate and tracker-mortgage rates, but in today’s market there are great deals available as the banks try to encourage us to save with them.” If you had a mortgage of £150,000 on a property worth £300,000 and decided to borrow an additional £50,000 on an interest-only basis, your repayments would go up from £685 to £913 - an additional £228 a month - with the above HSBC lifetime-tracker deal.

If you placed the extra £50,000 into an easy-access savings account such as the one offered by Birmingham Midshires at 6.5%, you would be earning £271 a month in interest, giving you an extra £43 a month.

The savings interest would be subject to income tax, though, so this is only really an option if one of you is a non-taxpayer.

It doesn’t work if you have a repayment mortgage either, because your monthly payments would be more than the interest that you would earn from your savings.

4 Go interest only

Most lenders will allow you to pay just the interest on a mortgage rather than the capital so reducing your monthly repayments, although this may become more difficult because of the credit crunch.

Last week Abbey increased the deposit it requires to 50% for interest-only deals, compared with 10% if you have a repayment loan, although you can still borrow up to 75% if you can prove you are saving to pay off the loan.

Although Abbey is the only provider to restrict lending on interest-only deals in this way, brokers expect others to follow suit.

If you had a £200,000 tracker mortgage with HSBC at 5.48% you would pay £1,226 on a repayment basis, but only £913 on an interest-only basis.

Each time you want to change your deal from interest-only to repayment, you will be charged an administration fee of between £50 and £75.

By extending the term of your mortgage you can also reduce the monthly cost. With the HSBC tracker over 25 years, a £200,000 mortgage would cost you £1,226 a month. Over 30 years it would cost £1,133 a month. By extending the mortgage however, you will also pay more interest overall. On the above £200,000 mortgage, you would pay a total of £407,880 over 30 years, but only £367,806 over 25 years.

“The reality is that people are unlikely to leave their mortgage as it is for the full term,” said Boulger. “If you do want to extend the term to make the mortgage repayments affordable, make sure that it is a temporary measure and reduce it or make overpayments as and when you can afford to do so.” 5. Borrow in a lower rate currency For those willing to take more risk, currency mortgages are another option. For example, if you had a mortgage of £1m and you converted this into US dollars at an exchange rate of $1.8 to the pound, your mortgage would be converted to $1.8m. If then the dollar weakened to $2 to the pound and you converted back to sterling, the loan would be worth £900,000 - reducing the overall mortgage by £100,000.

5. Borrow in a lower rate currency

For those willing to take more risk, currency mortgages are another option. For example, if you had a mortgage of £1m and you converted this into US dollars at an exchange rate of $1.8 to the pound, your mortgage would be converted to $1.8m. If then the dollar weakened to $2 to the pound and you converted back to sterling, the loan would be worth £900,000 — reducing the overall mortgage by £100,000.

If the dollar strengthened against the pound, however, the value of the loan would increase.

Most foreign-currency mortgages are based on Libor - the rate at which banks lend money to each other - plus 1% to 1.5%. Overnight Libor rates last week were 2.7% for dollar deals and only 0.57% for deals in yen, compared with 5.1% in sterling.

If you had a £500,000 mortgage at a rate of 5.48%, your monthly payment would be £2,283 on an interest-only basis. If you converted to a dollar mortgage at a rate of 3.7%, the monthly payment would be reduced to £1,542.

Currency loans are offered by specialists and are available only for loans of at least £250,000, but usually £500,000. Providers also require borrowers to have significant amounts of equity in their property - typically at least 40% or 50%.

Cormac Naughten of ECU, a foreign-currency mortgage specialist, said: “Our priority is to reduce the total loan amount through fluctuation in the exchange rate. If we can reduce monthly payments on top, then it’s a bonus.” There is a price to pay, however. ECU levies a fee of 1% on the first £500,000 that it manages. It will also charge 20% of any profit made from fluctuations.

So can you skip a month?

Halifax: Up to six months if payments are up to date and mortgage three months old. One per mortgage.

Nationwide: Three to 12 months if mortgage held for one year or more. Only two per mortgage.

Yorkshire BS: Overpayments to same value of the holiday must have been made.

Abbey: Overpayments to same value of the holiday must have been made.

Woolwich: Must have a mortgage reserve account and have made overpayments into it.

Chelsea BS: Allows payment holidays if you have made six consecutive payments and made sufficient overpayments.

Coventry BS: Allows payment holidays after the first six months, for up to three months. (Source: Savills Private Finance)