How to Pay off Your Mortgage Faster
Is your dream to be mortgage-free as soon as possible?
If you are looking pay off your mortgage and have disposable income to spare, even the smallest extra monthly payment could take years off your term.
Let’s take a £100,000 mortgage for example, taken out on a 25 year term at an interest rate of 3.5%, which would cost the borrower £500.62 per month.
By repaying just £50 a month on top of the standard monthly payment, you will reduce your term by three and a half years. Repaying an extra £100 per month will take six years off your mortgage!
The key question you need to answer when deciding whether to overpay your mortgage is whether it is a better investment for your earnings and savings.
Interest rates gained from putting your money in the bank are often considerably less than the rate of your mortgage – and the interest received is often taxable too – meaning it makes more financial sense to overpay where possible.
- If you are on your lender’s Standard Variable Rate (SVR), consider remortgaging to a deal with a lower rate of interest.
On an SVR you will be paying a considerable level of interest on your monthly repayments, so by moving to a cheaper rate of interest but keeping your repayment amount the same you will repay the remaining balance faster.
- If you are looking to overpay on your mortgage, always ensure you won’t face any penalties for doing so.
Some lenders charge you for repaying faster than your agreement states – especially if you are in the beginning of a fixed rate deal – so check your paperwork to find out how much they are happy for you to pay.
“Your home may be repossessed if you do not keep up repayments on your mortgage.”