There is no single solution to faster mortgage repayments; however, plenty of methods and strategies exist to fast forward this process. All these methods require nothing less than careful preparation and planning. If you want to learn how to pay off your mortgage and set yourself up for debt-free ownership faster, keep reading!
Thinking of Paying off Your Mortgage Early?
How to pay off your mortgage faster
If you do a quick search online for the best ways to pay off your mortgage faster, you’ll be flooded with a wealth of mortgage repayment strategies. Some of the strategies for paying off a mortgage early aren’t always as good as they seem.
In fact, the best tips and advice on paying off a mortgage can only be provided after a thorough assessment of your financial situation and the terms of your existing mortgage. Our experienced financial planners are here to explain the details.
First, assess your current mortgage conditions
Your first step to paying off a mortgage early is understanding how your mortgage terms affect how quickly you can prepay. The first factor to consider is the mortgage term, which is another way of saying how many years you need to repay your mandatory monthly repayments for the loan to be cleared. Most mortgages are 25 or 30 years long. Another factor is the interest rate. The higher the interest, the more your mandatory minimum monthly repayment will be, so getting a lower rate will mean you pay less and increase your ability to contribute extra mortgage payments to pay it off quicker.
You must also establish whether your mortgage has early repayment restrictions or charges. Some homeowners will incur financial penalties if they overpay on their mortgage by a certain amount within a set period. For example, you might be issued a fee if you pay off more than £20,000 of your mortgage in excess of mandatory repayments within 12 months. Some mortgages don’t have these terms and conditions, but they may still charge you an early repayment fee if you repay the entire mortgage before the mortgage term ends.
If you want to pay off your mortgage earlier but discover you would incur early repayment charges, it may be beneficial to remortgage to a product that allows earlier repayment with no penalty or a less severe penalty. In some instances, it is best to remain on the current mortgage, but this will depend on personal circumstances, which a professional mortgage adviser should assess.
Evaluate your financial situation
A key step to repaying your mortgage early is to evaluate your personal financial situation. The best way to do this is to create a monthly budget that includes your income and all expenditures. By keeping an updated budget that you monitor, you can identify areas where you can save more each month to use additional savings to make extra mortgage repayments.
If you can’t find ways to save and use that money to pay into your mortgage, there is another option. By negotiating a lower interest rate or switching to a mortgage with lower interest, your mortgage repayments will be decreased and you will have some extra money to make overpayments. There are many ways to negotiate a lower rate, and one way is to improve your credit score. A credit score is a numerical value in your credit report, which is a report of how you have managed finances (including debt repayments) over the last six years.
Budgeting techniques and emergency fund
Creating a budget to encourage savings is one of the best ways to overpay your mortgage and clear the debt faster. However, many people make budgeting mistakes that cause them to miss their goals. Two of the biggest mistakes are:
- Not adjusting the budget over time (especially after an unforeseen cost)
- Not being realistic
Both of these mistakes can result in losing enthusiasm to maintain the budget and monitor progress, which then reduces accountability to keep saving. For this reason, you must be honest with yourself on what is and isn’t achievable. Try not to cut all disposable costs as denying yourself the things you enjoy is unrealistic. If you can’t give up brunch with friends on the weekend, then don’t cut it out.
At the same time, your budget should include an emergency fund whereby you put some of your disposable income aside to cover yourself in an emergency, such as an emergency plumber, a mechanic to fix your vehicle or something else. If you worry about overpaying on your mortgage and maintaining an emergency budget, consider speaking to our mortgage advisers about offset accounts. These mortgages include a savings account, which acts as mortgage overpayments, but the funds remain easily accessible.
Faster mortgage repayment strategies
There are several methods people use to repay their mortgage quicker, such as:
- Contributing savings to your mortgage as additional repayments (check for early repayment terms first!).
- Renegotiate your current mortgage deal by citing competitive rates elsewhere, increased property value and improved credit score.
- Remortgage to a different mortgage with a lower interest rate, giving you room to make overpayments.
- Remortgage to a different mortgage with a shorter repayment term – if suitable.
Seek professional advice for the #1 strategy
For the best technique to pay off your mortgage early, speak with our qualified mortgage advisers who can assess your situation and long-term financial goals.
Another option is to speak with a qualified financial adviser who can provide advice on your complete financial health. The latter may be necessary if you have a complex financial situation, such as multiple lines of credit to repay, including more than one mortgage.
Setting adequate milestones
Repaying your mortgage early is the longer-term objective. Even with the best technique and lots of effort, it will take time to pay off a mortgage for most people. This is why setting smaller milestones and celebrating those wins is essential to keep you motivated along the journey. The mini milestones you create should be tailored to your situation to ensure they stay realistic.
Want to discuss repayment options with an expert?
Get personalised mortgage advice on how to become mortgage-free quicker. Our friendly team welcome these discussions and will actively look for the best ways to shave time off your mortgage repayments. We want to work with you to find the best solution, so get in touch and book a consultation today.
If you need help with your mortgage, call us today: 0345 450 4660
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