How to Pay Off Your Mortgage Faster

Paying off your mortgage faster might be desirable for a variety of reasons but whatever your reasons there are a few facts worth considering.

First of all, most people’s mortgage debt is the cheapest form of borrowing they have. Car loans and credit cards are far more expensive. Therefore, there’s little point paying off your best value loan if you are still borrowing on credit cards or to buy your next car. Get your priorities right.

The flip side of this is that whilst a car loan might be over say 3 to 5 years, a mortgage term is usually 25 years or more. That means that in most cases someone that borrows £100,000 over 25 years will end up paying back about £175,000 in capital and interest over the term of the loan. Now that’s sobering.

Of course, the faster you pay off debt, the less interest you accrue which, in turn, makes it cheaper to pay off debt. More of your monthly payment is made up of capital repayments.

Here are a few ways to pay down your mortgage faster and reduce the amount of interest

you pay over the term of the loan;

1. Take a mortgage over say 3 years less than you intended to. OK, this will increase your monthly repayments but it will also save you three years of payments at the end of the term. Ask your mortgage advisor to work this through for you. You’ll be amazed at the savings! Perhaps you need to add more hours or take a second job to make the additional monthly payments? That can be hard, but remember, for every monthly repayment made you are potentially saving hundreds or thousands!
2. Shop around for the best deals! Simply securing the best mortgage deal can save you thousands in saved interest and arrangement fees and redemption penalties! Capped and fixed rate mortgages are worth considering. Whilst interest rates remain historically low, use the time to repay as much capital as you can. You could save thousands of the lifetime of your mortgage.
3. Make cash lump sum payments. Using your bonus or cash windfalls to pay off your mortgage principal will not only save you a great deal of money, it’ll also stop you fluttering it away on ‘stuff’ you don’t need.
4. Transfer savings to reduce debt. With interest on savings negligible, you are probably best to use cash savings to reduce debt. Of course, make sure to leave enough cash savings for a rainy day. Cashflow for many people is very tight with one month’s lost pay cheque being unthinkable. Some lenders off an offset mortgage which effectively links your savings to your home loan and offsets capital in the former to reduce the costs of borrowing on the latter. This can be especially useful to those self employed people that need access to capital but not all the time.
5. Watch out for hidden charges! Many mortgage lenders will only allow you to make lump sum payments at specific times. If you pay off too much at the wrong time you might end up incurring punitive charges - Have your mortgage advisor check the small print!

For more information contact Mortgage Required to speak to a mortgage adviser today.