How to Pay off a Mortgage Early
Many people repay their mortgages early and it might be something that you like the idea of doing. It could save you money and reduce the time it takes you to repay which can be great. However, you may not know how to go about repaying it early and it is a good idea to find out.
Check Early Redemption Fees
The first step is to find out whether there is a fee form your lender for repaying early. This is often called an early redemption fee and is often more associated with fixed rate mortgages. However, check anyway as these could be quite significant and might mean that you cannot afford to repay early as they could be many thousands of pounds. Sometimes, they are just a few hundred pounds to cover the admin fees. Whatever the fee is, assuming there is one, you need to think about whether it will still be worth repaying early if you have to pay it. It can be worth trying to calculate how much money you will potentially save by repaying the mortgage early and see whether this would be more than the fee.
Consider Changing Lender/Mortgage
If you do decide to repay early, then it is worth considering whether it is a good idea to switch to a different lender or mortgage. You may need a more flexible mortgage to be able to make overpayments and it is good to discuss this with your lender. Find out whether you can do this with the mortgage you hold or whether they have any others that you can do it with. Also look at other lenders and see what they have on offer as you may find that you can get better value for money if you switch to a different lender. If you are tied in to your lender with a fixed rate, then you may have to wait until the fixed rate period is up before you can change.
Pay a Bit Extra off Each Month
It is a good idea to pay a little extra off each month. Consider how much you might be able to afford and just start doing it as soon as you can. Even small amounts can really add up and so do not worry if it is only an extra tenner a month, it will make a difference. You may find that you will be able to increase that amount as well by making some lifestyle changes. You might be able to compare prices and spend less on what you buy regularly and buy less luxury items and that will make more money available each month to overpay. You may also be able to find some ways to earn a bit more money too.
Drop in Lump Sum Repayments
As well as paying in more than you have to each month, it can be useful to put lump sum payments in when you have them. You will find that at times, you might discover you have a chunk of money in your account that you do not need to spend on anything and this will allow you to be able to pay in a lump sum. Even if it is quite small, it will help. It is worth bearing in mind that the interest on a mortgage is usually calculated daily and so as soon as you pay a bit off, even a small bit, you will be charged less interest. Then, due to the reduction in interest charged, you will have more money to put towards repaying the loan itself. The small payments will really start to pay off.