Forget fancy watches and vintage cars, the latest status symbol and sign of financial wellbeing is a paid-off mortgage.
Mortgage freedom is becoming increasingly popular amongst those looking to save money and invest in their future. If you like the idea of slashing the amount of interest you owe and becoming debt free, here’s how to become mortgage free quicker:
Remortgage for a better deal
Many homeowners are paying more than necessary for their mortgage as a result of interest. When someone applies for a fixed rate mortgage, for example, they’ll be offered a fixed introductory period where the interest rate is set at a certain percentage for a specified length of time. Once this period is over, the interest rate will default to the lender’s standard variable rate (SVR), and this could see the borrower’s mortgage payments increase.
With this in mind, it’s wise for homeowners to keep an eye on their interest rate and be prepared to remortgage for a better deal. Doing so has the potential to save thousands of pounds in interest over the course of the whole mortgage term.
While many homeowners remortgage after they’ve been moved onto their lender’s SVR, in some cases it’s possible to arrange a remortgage up to six months in advance of the fixed period’s expiration date.
Make overpayments
Making mortgage repayments can be a more flexible way of reducing the amount of interest you owe and becoming mortgage free quicker.
Even small overpayments can make a big difference. For example, let’s imagine you currently have £150,000 of mortgage debt and a mortgage term of 25 years. If your interest rate stands at 2.7% and you make monthly overpayments of £50, you’ll save £5,735 in interest alone and pay your debt off 2 years and 4 months earlier.
Most lenders will allow borrowers to overpay a certain amount each year. Often, this will be either 10% of the original loan’s value or 10% of the remainder left to pay. However, this can vary between lenders and some won’t allow overpayments at all.
Reduce your mortgage term
In theory, reducing your mortgage term has the same result as making overpayments. Your monthly repayments will increase, but in this case the agreement is more formal and less flexible.
This could be an ideal option for you if you’ve had a change in financial circumstances such as a promotion with a large pay rise. Since your income has risen, you may choose to reduce your remortgage term and commit to larger repayments. This will see you become mortgage free quicker than your original term agreement.
If you’d like help to become mortgage free quicker, please get in touch with the team at TaylorMade. Each year we help hundreds of homeowners to remortgage their properties and find much more suitable mortgage deals for them.
