It’s no secret, buying your own home is an expensive outlay and can often result in a debt that stays with you for a large proportion of your life. However, what isn’t as widely known is the fact that you can actually pay your mortgage quicker, and save yourself a pretty penny in the process, too.
So, if you are looking to shorten the length of time your mortgage stays with you and lessen the amount of interest you give the bank or building society you hold it with, read on!
Making overpayments is a great way to pay your mortgage quicker and bring down the amount of interest you hand over in the process. Most people think that they’d have to increase their mortgage payments significantly in order to make a dent in their principle, but the truth is that this simply isn’t the case.
Paying off even a tiny amount more each month can have a dramatic impact on the amount of time it’ll take you to clear your mortgage. Add to that the fact that interest rates are at rock bottom and you have an even greater reason to pay more off of your mortgage. After all, a savings account is hardly going to make you wealthy these days!
The majority of mortgage providers allow their customers to overpay 10 per cent of the remaining loan value each year, even if they are tied into a fixed rate mortgage, without incurring a penalty. This means you could save a bundle on interest payments and bring down the amount of time it takes to clear your mortgage, too.
2. Plough lump sums into your mortgage account
While many of us will never see a lump sum, if one does happen to come along it makes sense to put it into your mortgage account. Doing so can have a significant impact on your outstanding debt.
Bonuses, inheritances, winnings, etc. can all be used to pay off your mortgage quicker, but do check to see whether the 10 per cent rule applies before putting large sums of cash into your mortgage account.
As with regular overpayments, one-off lump sums will not only reduce the amount of time it’ll take to pay your mortgage, it’ll also bring down your interest payments as well.
3. Switch your mortgage
If you’re not tied into a fixed rate or tracker mortgage, it may be worth looking into the various deals currently available to you, both with other providers and your existing bank or building society.
Shopping around can save considerable amounts of money, which, in turn, will allow you to overpay without feeling the hit at all. Nice!
4. Look at an offset mortgage
This isn’t something for everyone, but if you have some savings put away you may want to consider taking out an offset mortgage to replace your existing one. An offset mortgage allows you to link your savings to your mortgage, effectively reducing the amount of interest you are required to pay.
For example, if you currently have an £150,000 mortgage and £30,000 in savings, offsetting your mortgage would mean that you only have to pay interest on £120,000. The savings you make by doing so can then be ploughed into overpayments, bringing down the length of your mortgage without breaking the bank.
5. Actively shorten your repayment term
Instead of paying more in the form of overpayments or lump sums, why not think about shortening the term of your mortgage? Most people opt for a 25-year term when they first apply, but this isn’t set in stone. In fact, you can drop the length of your mortgage down to just five years if you wish, providing you can meet the repayments, of course.
Shortening the length of your mortgage will automatically decrease the amount of interest you’ll have to pay, and the extra bit of pain now will be well worth sacrificing for when you see the finish line in sight.
That’s our five ways to pay off your mortgage faster complete. If you’d like to discuss your options with an expert, we highly recommend Clarity Financial Management who can give you independent advice. We have a close working relationship with them and their service is second to none. Give them a call on 0127 763 3300 to see if you can reduce the amount of interest you’re paying and bring the length of your mortgage term down, too.
For any other property related queries you may have, our friendly staff are always on hand to give you help and advice. Give them a call today, or drop them a line using the details below: