From improving cash flow to helping you live a more financially secure retirement, paying off your mortgage early can have countless benefits. Here are just a few reasons to become debt-free:
You’ll free up money to be spent on other things
By paying off your mortgage early you can improve cash flow and free up money to be spent on other things. Whether you want to go on holiday or invest in home improvements, you should find it so much easier to get the money together once you don’t have to take mortgage repayments into account.
You’ll save thousands in interest payments
When making mortgage repayments each month, you’re paying back more than just your home’s value. Your repayments include interest too.
If you borrowed £100,000 at an annual interest rate of 3% over a term of 35 years, you’d actually pay back £161,602 over the course of your mortgage.
By paying off this money early - either in small chunks or one large sum - you could save thousands of pounds in interest. Before overpaying on your mortgage, check with your lender to see if you’ll face any early repayment charges.
You’ll be mortgage-free in retirement
It’s difficult to determine exactly how much each of us needs for retirement, since it’s impossible for most of us to predict how long we’ll live. But according to research from the National Employment Savings Trust (Nest), the average person needs £15,000 for a comfortable retirement. Assuming you retire at 70 and live for 15 years, that’s a whopping £225,000 you’ll need to save.
By paying off your mortgage early, you can reduce the amount you spend on living costs in retirement. If you pay it off several years before you retire, you’ll also free up more money to put towards your pension or investments.
