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.