Being mortgage free
25 July 18  /  Insights

Having a mortgage is arguably one of the biggest debts you will acquire in your lifetime and as soon as you become a homeowner, it is engrained into you that you must pay your mortgage off as soon possible.

It is splashed in the news with tips of ‘being mortgage free by 50’ or ‘being mortgage free at 40’, or ‘having a mortgage free life’, but is paying off your mortgage as quickly as possible always the right thing to do?

There can be benefits of being mortgage free. For example:

  • As a general rule, the quicker you pay off a debt, the less interest you will have to pay and this usually applies for mortgages too.
  • It can offer more financial security. Once a mortgage is paid off, you will have more flexibility in your monthly budget. This money can be used elsewhere such as in a pension plan or an investment.
  • Your mortgage free life may mean you can use the surplus money each month for other ventures. Perhaps you want to go on a cruise, buy a new car or start a new business.

So, how do you pay off your mortgage faster?

1. Shorten your mortgage term with overpayments each month – whilst payments will increase, you should lower any interest there is to be paid as it will be over a shorter period of time.

2. Re-mortgage your home for cheaper and shorter deal. By switching to a new mortgage provider, you may be able to find a cheaper mortgage interest rate for up to 5 years of the mortgage term. You may also be able to negotiate a shorter term.

3. Switch to an offset mortgage – An offset mortgage works by linking your savings account to your mortgage. All the money you have saved up will be taken off the mortgage balance. Your interest payments should be lower as you will only be charged interest on the mortgage balance minus your savings.

Of course, there are cases where paying off your mortgage may not be the right thing to do. For example:

  • You may have other debts or loans that should prioritise being paid off.
  • You may be charged a penalty fee for overpaying your mortgage. It is important to ask your mortgage provider beforehand.
  • Investing money may give a higher return on your money.

Understanding what is right for you may be complex. As a team of Lifestyle Financial Planners, we can help point you in the right direction, encouraging you to make financial choices that are right for your future plans.

Get in touch to discuss your concerns or requirements on 01865 208012 or click here to send us an email.

LinkedIn Find out more about when you should and when you shouldn’t consider paying off your mortgage early.