Tips to pay off your mortgage faster
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1. Cut your mortgage term
Paying off your mortgage early makes sense: not only can you be free of monthly payments but you end up paying less overall for your property.
Taking out a shorter-term loan means you’ll have to pay higher monthly repayments but it works out far cheaper in the long run.
Do the sums to see the savings, says Mark Chilton, chief executive of Purely Mortgages.
Take a homeowner with a mortgage of £200,000 at 5.45% which you could currently get on a two-year fixed-rate mortgage with Leeds BS.
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Do sums to save
Over 25 years, you would pay back £366,663 over the course of the loan, with monthly repayments of £1,222.
However, if you could afford to pay £2,165 each month you could repay the mortgage in 10 years and pay back a total of £259,868 – saving £106,795.
A more realistic aim is to pay back your mortgage within 20 years rather than 25, which would mean monthly repayments of £1,370 – an extra £148 each month, or about £34 more per week.
This would mean repaying a total of £328,831, or £37,832 less than if you take five years longer to pay back the debt.
“The savings are massive,” says Chilton. “Remember it’s all interest, so it’s a very real saving.”
“Even if you start on a 25-year term you can agree to shorten this with your lender as your circumstances change and achieve a significant proportion of these savings.”
