How to Pay Your Mortgage Off Early

Making plans to pay off your mortgage early is a great idea. It will mean that you can put the money you no longer pay out each month to good use, but how practical is it when people are overwhelmed with day-to-day expenses? Here are a few ideas to help you consider the options.

PAY MORE THAN YOUR SET MONTHLY PAYMENT

If you increase your mortgage direct debit so that you pay back more than your normal payment, it will have the effect of shortening your mortgage term and reducing the amount you pay back in total. Common sense, yes, but you would be surprised at how small amounts here and there really do add up. It doesn’t have to be every month, but if you get in the habit of using any extra cash here and there, over time you will be thrilled you made the effort.

SHORTEN THE REPAYMENT TERM

While lenders tend to use a term of 25 years when illustrating repayment terms, this isn’t set in stone. If you can demonstrate that you can afford the higher monthly repayments, you can ask for a loan for a shorter number of years. The shorter the term, the cheaper the loan will be overall as you will pay less interest.

USE A BONUS, WINDFALL OR INHERITANCE

If you find yourself in the lucky position of coming into money, then consider using some or all of it to repay some of your mortgage as a lump sum payment.

THINK ABOUT OFFSETTING

With an offset mortgage, although your mortgage won’t be paid off earlier, the total savings balance that you hold with your lending bank or building society effectively reduces the amount of the outstanding loan on which interest is charged. So, if you have savings of £20,000 with them and a £200,000 mortgage, you’d only be charged interest on £180,000.

POINTS TO NOTE

If you have loans or credit card debts, it may make sense to pay these off first. Also, some mortgage lenders impose early redemption penalties or stipulate a minimum you can over pay.

GET A MORTGAGE REVIEW

If it’s been a while since you took out your current mortgage, or your existing deal is nearing its end, then it’s an ideal time to take mortgage advice to see if there’s a better, more cost-effective mortgage deal available that would be right for your circumstances. With interest rates remaining low, mortgage rates continue to be very competitive.

A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

LOOKING FOR A MORTGAGE LATER IN LIFE

With people getting on to the property ladder at all stages in life, a growing number are looking for mortgage finance in their 50s and beyond. This has created demand for greater flexibility, and lenders are now beginning to address the needs of this age group.

THE OLDER BORROWER

Following the Mortgage Market Review in 2014, banks and building societies were required to adopt stricter lending criteria and affordability checks, and as a result many lenders restricted both their maximum borrowing and repayment age.

However, we know the lenders in the marketplace who are happy to cater for specific mortgage needs such as this and we can help with the process. Older borrowers still need to go through the usual checks to ensure they can afford to make their monthly mortgage repayments and they will also need to show proof of income and declare all outgoings, including any debts.

Lenders will consider issues that could affect an older borrower’s income, such as their state of health, and in the case of joint borrowers, what would happen to their finances if one of them were to die. A lender will assess whether a loan is affordable in the case of a potential borrower in receipt of a pension, as opposed to one who is likely to retire half way through the mortgage term.

On the other side of the coin, older borrowers can often be free of other commitments that can burden younger borrowers – they are further into their careers and probably earn more, their children may have left home, and many may have already come into money through a family inheritance.

TAKE ADVICE

Getting advice can really help. We know the marketplace and so are able to ensure that your application goes to a lender who caters for your specific mortgage needs.

A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

80% OF MORTGAGE HOLDERS DON’T HAVE INCOME PROTECTION

For most of us, our mortgage is likely to be the biggest expense we have in our lifetime, so it pays to think about what would happen if you could no longer pay it. Sadly, as we all know, sometimes things don’t go according to plan, and our lives can be turned upside down.

One of the most compelling arguments for families taking out protection policies is to ensure that their families are able to carry on paying the mortgage in the event of an illness, long-term sickness, accident or death. With a policy in place, there would be an income or a lump sum available to them to keep a roof over their heads, meaning that they wouldn’t be burdened with money worries at a difficult time.

AN IMPORTANT STEP THAT SHOULDN’T BE PUT OFF

A recent survey1 amongst mortgage holders found that 42% don’t have a life insurance policy in place, 71% have no critical illness cover, and 81% don’t have any income protection in place.

Whilst many people realise that having a policy in place would provide valuable peace of mind, taking out a policy is a task that never quite gets to the top of their priority list; 20% of full-time working people questioned for the survey recognised that they would benefit from having insurance protection, but hadn’t got around to arranging it.

Getting the right policy in place needn’t be stressful or time-consuming. We will be able to review the market and recommend a policy that’s cost-effective and provides the right type and level of cover for your circumstances.

1Royal London, State of the Protection Nation, 2018

A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.