Not only is it a huge accomplishment to pay off your mortgage early, it is a wise financial decision to do so. Of course, your mortgage repayment is likely one of your biggest monetary obligations, but there are ways to reduce the amount of money you owe and save money in the long run. To find out a few strategies you can use, read on.
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.
Making overpayments
The first strategy you can employ is to make overpayments on your mortgage. While some lenders allow up to 10% of your balance to be repaid each year, unfortunately, some lenders may require you to apply first and others might have limits for how much you can overpay or they might actually charge fees for overpaying or paying off your mortgage early. So be sure to confirm with your lender before adopting this strategy.
When you make overpayments, you can actually shorten the term length of your loan or you can lower your monthly payment amount in the long run. Be sure to talk with your lender about applying the overpayment to your entire amount owed so your interest reduces. Doing this saves you money over the course of the loan by reducing the total interest paid over the life of the mortgage.
How to make overpayments on your mortgage
How you make your overpayments will be up to you. If you come into a lump sum somehow, or have some money from an ISA to use, you can put that toward your mortgage or you can use money from your monthly income, or even from your investments. If you’re considering overpayment, it’s best to get professional mortgage advice to understand what approach would best suit your individual circumstances.
A mortgage adviser will be able to assist you with establishing a budget for sustainable overpayments and having a realistic target to hit each month will help you form the rest of your overpayment/early repayment strategy.
Selecting the right mortgage type
Another factor that will be important in your ability to overpay your mortgage is the kind of loan you have. Fixed-rate deals, as the name suggests, are fixed at a certain interest rate so the amount of money you pay back each month won’t change, allowing you to easily plan how much you can overpay.
Tracker mortgages, on the other hand, change according to the Bank of England base rate, so estimating overpayments might be difficult and inconsistent. You will need to choose the mortgage type that works best for you, but if one of your financial goals is to pay off your mortgage early, careful consideration will need to be taken before deciding which kind of mortgage to go with.
Working with a mortgage adviser
There can be thousands of pounds worth of benefits to paying off your mortgage early. Selecting the right kind of mortgage and making overpayments can help you be mortgage-free earlier than the terms your loan dictates and ultimately save more money in the long run. Before embarking on an early repayment journey, remember to consult with a mortgage adviser to ensure that your strategy aligns with your overall financial plan and goals. To discuss your mortgage options, get in contact with the experts at Dental & Medical Financial Services today.