If your mortgage is draining a vast amount of cash from your resources every month, the idea of being free from the commitment may sound almost impossible. However, many homeowners across the UK have been able to slash their outgoings by paying off their mortgage early.
Even if you’ve only got a few years left to pay on your mortgage, clearing the balance can still be a worthwhile exercise. Every year you’ll be forking out thousands of pounds of interest, all of which you can put in your pocket instead when your mortgage has been paid off in full.
Interest payments are typically loaded to the front of the mortgage so the sooner you can clear the balance, the more you’ll save. Here are a few things to consider and tips to try.
Don’t Skimp on the Small Stuff
The notion of having enough cash to pay off your full mortgage balance may mean that you focus on the big picture, but don’t forget about the small details true. While you will need a wider game plan if you’re going to successfully pay your mortgage off, the smaller financial commitments can still play a part.
This means seeking out the most competitive rates on utility bills, and not being afraid to switch providers to get the best deal. Be aware of energy efficiency so don’t leave lights on unnecessarily or heat the house when no-one is going to be home. Apply the same principles to insurance and any other bills and you’ll soon find that you’re saving a tidy amount per month.
Food shopping isn’t exempt from the cost-saving exercise either. No-one is suggesting that you go hungry but swapping to a budget shop such as Aldi can be remarkably economical.
Regularly Overpay you Mortgage
Overpaying on your mortgage regularly is one of the easiest ways to chip away at the balance, helping to reduce what you owe in small increments.
Many lenders are willing to allow over-payments without any penalty but make sure you check the small print first.
It’s not unusual to have a limit on the amount you can overpay; this is typically in the region of 10% annually. If you exceed this allowance, you’ll be slapped with an early repayment charge, wiping away some of those gains.
Don’t Reduce Your Monthly Payments
If you’ve overpaid on your mortgage, you may find that your lender automatically recalculates your monthly payment, giving you a smaller sum to find every month. If you’re trying to clear your balance, this move is counterproductive as it means you won’t pay off your debt any quicker.
Instead, make sure you stick to the same monthly repayment; refuse any attempt from your lender to drop the figure. Alternatively, with an improved loan to value ratio, you could qualify for a better mortgage elsewhere with lower interest rates. By paying the same monthly sum but switching to another lender, you will start to pay off the capital much more rapidly.
