If you’ve got a mortgage, chances are you’d like to see the back of it as soon as possible. Here are some tips from Which? to paying off your loan faster.
1. Remortgage.
You can reduce the rates of interest you are paying by re-mortgaging to another provider. By reducing the amount of interest you pay but keeping your payment at the same amount, you could reduce the term of your mortgage and reduce the amount of interest you pay.
2. Reduce the term of your mortgage.
Many chose a 25 year mortgage term without considering the alternatives. Even a 24 or 23 year term can save vast amounts in interest payments. A good mortgage adviser will to talk you through the cost of varying different mortgage terms in line with your budget.
3. Get an offset mortgage.
Money put into an offset savings account is used against your mortgage balance to reduce the interest you pay. This allows you to make lower monthly repayments on your mortgage or make overpayments against your mortgage, cutting years off your mortgage term and reducing the amount of interest you pay overall. This type of deal is particularly beneficial to higher rate tax payers as they can save 40% in tax on their savings if they use it to “save” with an offset mortgage.
4. Overpay while mortgage rates are low.
If you can make higher repayments now, it won’t be a shock when the cost of borrowing increases. By which time, you would have reduced your mortgage balance. A good mortgage adviser will provide you with examples of how much interest you could save by overpaying your mortgage. Ideally, your mortgage should enable you to overpay by an amount you are comfortable with, without charging you fees.
5. Ditch debt.
If you have loans and credit cards which have higher rates of interest than your mortgage, pay these debts off before you overpay your mortgage. Take a mortgage payment holiday, should your mortgage lender allow this, in order to pay off higher interest-bearing debts. However, you must be certain that taking a payment holiday will not impact upon your credit file.
5. Shop around to save cash.
Have you reviewed your insurance or utility costs lately? Any premium you’re paying for a length of time should be reviewed regularly, as savings can be used to pay off your mortgage.
6. Budget.
Make a weekly household budget for food and bills and stick to it. We always have unexpected expenses but being disciplined with your outgoings can be very useful.
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