Paying off a mortgage early can be a massive financial boost. The average age people expect to repay their mortgage is at 57-and-a-half, according to financial services firm Hargreaves Lansdown. By paying it off early you reduce your monthly outgoings and reduce the amount of interest you pay overall.
Paying off your home is never a bad idea. Here are some tips to help you pay off your mortgage early.
Prioritise Your Debts
In order to achieve your financial best life, you need to prioritise paying off your highest interest debts first. Credit cards and loans often have a much higher interest rate than your mortgage, therefore you should work towards paying these off before your mortgage.
If you have credit card debt, you can move your balance to a 0% credit deal (see Money Saving Experts best balance transfers guide).
overpay Up to 10% per year
If you’re on a fixed-rate mortgage, lenders usually allow you to overpay by 10% (of your mortgage balance) per year. However, this can vary by provider, with some charging a fee on overpayments – it’s worth checking with your provider for your exact overpayment allowance.
Overpaying can save you £1000’s in interest and reduce your mortgage term. You can find out how much you could save by using a mortgage calculator.
If your fixed-rate term has ended and you’re on your lender’s standard variable rate (SVR) you will likely be able to overpay as much as you want. Although, you can usually get a better deal than the SVR by remortgaging. If you are looking to remortgage make sure to make any overpayments while you’re still on the standard variable rate.
savings vs Mortgage overpayment
With savings rates currently decreasing, if you have money sitting in a low-interest savings account it’s well worth making an overpayment on your mortgage. Choosing to use your savings could save you £1,000’s in interest.
However, if your savings account has a higher interest rate than your mortgage you would be better off keeping your money earning the higher interest.
Increase Your Employment Income
Earning more money will make it possible to make bigger and more regular overpayments. Subsequently, allowing you to pay off your mortgage early and avoid a ton of interest. Increasing your monthly incomings will also give you the option to increase your payments when you remortgage. This is because lenders trust that you can afford larger payments.
The most attractive extra income, when it comes to what lenders are looking for is your employment income. As this is often the most reliable and secure type of income. So your first step should be to assess how you can increase your traditional earnings. Consider these options.
- Ask your employer for a pay-rise
- Look for a better paying job
- Increase your hours or apply for an additional role
Earn Additional Income
Extra ‘side hustle’ income is a great way to boost your ability to overpay. You can earn up to £1,000 extra money before having to declare this money to HMRC. This means that you can earn an additional £80 a month tax-free. Here are some side hustle ideas to help you earn additional income.
- Freelancing your skills
- Survey sites
- Matched betting (this is tax-free)
If you do earn over £1,000 through your side hustles, you will have to file for a Self Assessment tax return via the HMRC website.
Speak to a Mortgage Advisor
If you are not confident about the mortgage process speak to someone that is. A qualified mortgage broker is a financial advisor that specialises in mortgages. It’s their job to find the right mortgage for you. Mortgage brokers have a duty of care towards you, meaning they have to be able to justify any recommendations they make.
More ways to earn and save more
If paying off your mortgage would boost your quality of life then I hope that these tips will help you to achieve your early payment goal.