Your mortgage is a significant financial burden, and you’d likely love to pay yours off more quickly, given the chance. Doing so could mean you are debt-free sooner, and able to use more of your income to live your dream retirement, while reducing the amount of interest you pay.
But you need to be wary of your lender’s early repayment charges (ERCs) too.
So, how do you pay off your mortgage as quickly, affordably, and efficiently as possible?
Here are just four tips and tricks you might consider.
1. Switch your payments to twice a month
A recent report by the Express reveals that you could save on your mortgage simply by switching to payments twice a month, rather than monthly payments – if your lender allows it.
Doing so means that you’ll pay 26 half-payments during the year, equivalent to 13 months. Published figures suggest that this could save you as much as £49,118 in interest and mean you’ll be mortgage-free four years and nine months earlier than if you paid monthly.
The calculations are based on the average UK house price and found that the greatest savings could be enjoyed in Greater London. With house prices in this region topping £510,000, you could see an interest reduction of more than £92,000.
Even in areas with lower average house prices, savings exist. Northern Ireland has an average house price of £168,791, which means that payments made twice a month could save homeowners just over £30,000.
2. Remortgaging but maintaining your higher monthly payment
Mortgage rates hit a recent-memory peak following the mini-Budget of September 2022, with a two-year fixed mortgage climbing above 6.5%.
Since then, the market has recovered slightly but rates remain around 5%, which could mean you end up paying more when the time comes to remortgage.
With rates high, you’ll no doubt be searching for the lowest possible rate but reducing your monthly (or twice a month) payment once you remortgage, might not always be the best option.
If you can afford to maintain your current payment, but do so at a lower rate, you’ll be eating into your debt more quickly and reducing the interest you pay overall.
This might take some budgeting, but remember: you’re paying this amount already, so will you really miss the money you might’ve saved?
3. Rounding up your mortgage payments
You might already have a round-up app attached to your internet banking that rounds up your card purchases and automatically saves the odd change for you. If you do have such an app, you’ll have seen the difference it can make on day-to-day purchases.
Imagine, then, the impact of adopting a similar approach to repaying your mortgage.
Contact your lender to find out how much you’re paying now and then round it up to the nearest £10 or £100.
As already mentioned, though, you’ll need to be aware of your lender’s ERCs. These are a charge for repaying your loan early or for overpaying too much each year, charged as a percentage of the outstanding debt.
ERCs normally range between 1% and 5%, which for a large mortgage can be a huge penalty, especially if you have failed to take them into account and so have not budgeted for the additional cost.
4. Making one additional mortgage payment each year
Rather than rounding up the amount you pay each month, you might opt to pay a one-off top-up each year, being sure to keep this below the amount that would incur an ERC.
By making these payments every year over the whole mortgage term, you could see a significant reduction in interest and pay off your debt earlier.
As with all these options, making changes to your mortgage or mortgage repayments can have significant long-term consequences so you must speak to the experts first.
Get in touch
If you have questions or concerns about any aspect of your mortgage, speak to our professional team of mortgage advisers now. Get in touch by emailing hello@fingerprintfp.co.uk or calling 03452 100 100.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.