For most of us, buying a home of our own is likely to be the single biggest purchase we will ever make in our lives – whilst paying for it usually represents our single biggest monthly outgoing.
It’s estimated that the average annual UK mortgage repayments add up to almost £7,000 – or around £580 a month*.
Our mortgage is a debt that we all take in our stride and accept for most of our adult lives.
But what if you suddenly no longer had to meet those payments? Just imagine how much money you’d have left at the end of each month!
Here are a few considerations to think about, if you’re aiming to pay off your mortgage early and achieve financial freedom…
Saving for a rainy day…
Sound financial advice dictates that we should all have money put aside for that ‘rainy day’ – because, as one advertising campaign once said, ‘life happens’.
But beyond your ‘rainy day’ money, how best to use any other spare cash you might have if working towards becoming mortgage-free is a priority?
Short-term pain, long-term gain…
Regular overpayments can significantly cut down the time it takes to pay off your mortgage – potentially saving you thousands of pounds.
But firstly, check out your mortgage agreement for rules on overpayments, some lenders allow you to pay back 10% extra a year without incurring early repayment charges.
Also, watch that if you do make an overpayment, your lender doesn’t then simply reduce your monthly payments. If they do, you’ll be better off each month – but won’t clear your mortgage any faster.
The nest-egg option
If you have a tidy nest-egg stashed away, consider using that to pay off your mortgage.
A basic calculation can show you whether this makes financial sense: are your savings earning less than the level of interest you’re paying on your loan?
If yes, then think about using the money to reduce your debt. But again, check your lender’s rules on overpayments and Early Repayment Charges before deciding!
Keep your interest payments as low as possible.
As your current mortgage deal approaches its end, shop around – or see what your existing lender can offer you.
And if you DO want to use a nest-egg to pay off a chunk of your mortgage and you’re arranging a re-mortgage, now might be the ideal time to do it – as you might have no overpayment/Early Repayment Charges!
Figuring it all out…
If you still need convincing about the merits of seeing your mortgage off early, find out how much better off you might be…
Ask your lender precisely how extra payments might benefit you – or study your annual mortgage statement, to see just how far you still have to go, and how the interest stacks up. It might just convince you to start saving even harder!
We’re here to help
Regardless of who your current mortgage is with, we’re here to help! One of Leek United’s Qualified Mortgage Advisers can talk through your mortgage situation with you, and the best options available to you. To make an appointment, call us today on: 0808 169 6680
The bottom line…
The best thing about being mortgage-free is the feeling of relief it will bring, knowing that the whole house is yours for keeps and your money is now your own.
And with mortgage repayments no longer absorbing your monthly income, you can then focus on other financial goals…such as boosting your pension…
*UK Finance statistical data supplied by Bank of England via Haver Analytics, which indicates that at the end of 2018 the average UK mortgage was £128,805. This amount was being repaid at an interest rate of 2.49% over 25 years with monthly payments of £577.19 x 12 months giving an annual repayment of £6,926.28.
This article is intended as a summary only and does not constitute legal or financial advice from Leek United Building Society. No reliance should be placed on this article. We recommend that you seek independent legal and/or financial advice if you have any questions or queries.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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