Owning a home outright is a huge accomplishment and often something that takes years to achieve. One of the country’s biggest banks has recently run a contest to pay off a few lucky homeowners’ mortgages, giving these individuals a leg up. But you don’t need to win the lottery to own your own home, all it takes is dedication and planning.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
First things first
Before you can successfully pay off your mortgage in a timely manner (and own your own home outright by the end of your term — or perhaps even before) you need to ensure you currently have the best deal you can get.
Of course, the importance of shopping around for a great rate for your initial term is common knowledge, but many people often forget that there’s another chance to secure a great deal — remortgaging.
At the end of the initial period, people often get stuck with a provider’s standard variable rate, which currently runs at about 5%. Common reasons for this include:
- Forgetting or not realising that they can negotiate better terms
- Not considering changing lenders for a better rate
- Forgetting when their term is up, or
- Thinking that repeating the mortgage-seeking process is an unbearable prospect.
These issues can be remedied with the help of a mortgage broker.
Overpayments can help you save
Once you’ve ensured that you have secured the best deal possible, the next step is to cut down on your overall mortgage bills by making overpayments. By doing this, the length of the loan is shortened and you reduce the amount of interest you end up paying to your lender – a win all round for you.
When you’re searching for a mortgage loan, make sure that you choose one where there will be no penalty for overpayments or early payoff.
Some lenders may stipulate that repaying your mortgage in full could cost you as much as 5% of the loan’s value, and these tend to be attached to “special” low-cost fixed rates or discounted products. Always review the fine print in your loans to avoid any charges and understand exactly how much you can overpay each month or year.
Example
Take, for example, a loan of £150,000 with a rate of 2% over 25 years. By overpaying just £50 a month, you could save just over £4,000 and reduce your term by a little over two years.
A £100 overpayment could save you nearly £7,300 and reduce your term by just over four years. And if you were able to overpay by £200 each month you could save about £12,350 in interest and reduce your term by just over seven years!
The best time to reconfigure your payments may just be during the remortgaging process. If you are able to get a better rate or better terms, you can keep your current payment as it stands as you are already used to paying that amount each month.
It will have little effect on your bank account right now but can save you a fortune down the road.
Speak to a broker
If you’d like to find the best mortgage deal or save on mortgage payments, working with a mortgage broker to find the right loan for you is crucial. Get in touch with us today.
Need help to secure a low-cost mortgage?
Mortgages | Buy to Let | Property | Mortgage Planning |
Dental & Medical Financial Services have been helping doctors and dentists with finding low-cost mortgages for your home and investment properties for over 25 years. Call Chris to discuss your options.
Tel: 01403 780 770