Repaying your mortgage early

Paying off your mortgage faster requires discipline and a strategic approach. However, always check with your mortgage provider to ensure there are no penalties for early repayments and that the additional payments are applied directly to the principal.

Make Extra Payments

Biweekly Payments: Instead of making monthly payments, switch to biweekly payments. This results in 26 payments per year (equivalent to 13 monthly payments), helping to pay down the principal faster.

Additional Lump Sum Payments: Whenever you have extra money, such as from a bonus, tax refund, or inheritance, consider making a lump sum payment towards your mortgage principal.

Increase Monthly Payments

Round Up Payments: Round up your monthly payment to the nearest hundred. For example, if your payment is £845, round it up to £900.

Add a Set Amount Each Month: Add a specific extra amount to your monthly payment, such as £50 or £100, which will directly reduce your principal balance.

Refinance to a Shorter Term

Switch to a 15-Year Term: If you currently have a 30-year mortgage, refinancing to a 15-year mortgage will increase your monthly payments but significantly reduce the total interest paid over the life of the loan.

Lower Interest Rate: Refinancing to a lower interest rate can reduce your monthly payment, allowing you to allocate the savings towards the principal.

Make One Extra Payment Annually

13th Payment: Make an extra payment equivalent to one month’s mortgage payment once a year. This can be done by dividing your monthly payment by 12 and adding that amount to each monthly payment.

Apply Windfalls to Your Mortgage

Use Bonuses and Gifts: Apply any financial windfalls directly to your mortgage principal. This includes work bonuses, monetary gifts, or tax refunds.

Savings or Investments: Consider using a portion of your savings or returns from investments to pay down your mortgage.

Cut Expenses and Reallocate Savings

Budgeting: Review your budget and cut unnecessary expenses. Redirect these savings towards extra mortgage payments.

Reduce Discretionary Spending: Limit spending on non-essential items and use the savings to pay down your mortgage.

Utilise Offset or Overpayment Accounts

Offset Mortgage: If you have an offset mortgage, link your savings account to your mortgage. The savings balance offsets the mortgage balance, reducing the amount of interest charged.

Overpayment Facility: Check if your mortgage lender allows overpayments without penalty. Regularly overpaying can reduce the principal faster.

Review and Adjust Your Mortgage Regularly

Interest Rate Reviews: Regularly review your mortgage interest rate and switch to a better deal if possible. A lower rate can reduce your payments, allowing more to be directed towards the principal.

Fixed vs. Variable Rates: Consider the pros and cons of fixed vs. variable rates. A fixed rate provides stability, while a variable rate might offer lower rates during certain periods.

Seek Professional Advice

Mortgage Advisor: Consult a mortgage advisor to explore options tailored to your financial situation and goals. They can provide strategies to pay off your mortgage faster.

Financial Planner: A financial planner can help you balance mortgage payments with other financial goals, such as retirement savings.

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