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Sponsored feature | Rachel Zschieschang, Mortgage Advice Bureau

Rachel Zschieschang, Mortgage Advice Bureau (50627272)
Rachel Zschieschang, Mortgage Advice Bureau (50627272)

You want to pay off your mortgage early. Who wouldn’t? To live the rest of your life without having to worry about mortgage repayments – it’s the dream every homeowner works towards.

What are the benefits of being mortgage free?

It might sound nice to say you’re ‘mortgage free’, but what are the actual benefits of no longer having to pay off your mortgage?

Let’s start with the most obvious reason – you’ll have more money. No longer having to make monthly mortgage repayments will mean you have more disposable income at the end of the month. For some, this makes the prospect of retiring early a genuine possibility, while for others, it means having more money to support their children with. Whatever you use your money for – being mortgage free will mean you have more of it.

Paying your mortgage off early will also mean that you’ll pay less interest overall – this could save thousands, or even tens of thousands of pounds.

Finally, you’ll have the security of knowing you own your home outright. What could be better than that?

How do I get started?

We’ve established why paying off your mortgage early is a good idea. What do you need to do now?

Check your current mortgage deal

The first step is easy – make sure you’re on the best mortgage deal. If you’re paying more than you need to each month, you’ll be wasting money that you could be using to become mortgage free! Here’s what to do:

Make sure you’re not on a standard variable rate (SVR) – If your mortgage deal has ended, you will have lapsed onto your lender’s SVR and you could be paying hundreds of extra pounds per month compared to other deals on the market.

Work out the loan-to-value (LTV) of the mortgage you’ll need. If you decide to remortgage you may find you have greater access to mortgage deals than when you took out your last mortgage. This is because your house has increased in value since you took your last mortgage out, or you’ve been paying a repayment mortgage, or both – you will own a greater proportion of your home. This means the LTV ratio – the size of your mortgage amount compared to the value of your home – will be lower. The lower your LTV, the more mortgage deals may be available to you, and you may get access to better rates too.

Browse the market for a new deal. You want to make sure you’re on the best deal possible. To do that, you’ll need to look around and see if you can find any better deals.

Take a look at our ‘Find a mortgage’ search tool online. All you have to do is pop in a few details, and we can show you all the different mortgages available to you.

You don’t have to worry about working all of this out yourself – we’re here to help. If you would like some help finding a new mortgage deal, you’re in the right place.

Make overpayments

If you’ve just moved home, or just remortgaged, you probably won’t need to look for a new mortgage deal. You could, however, consider making mortgage overpayments.

A mortgage overpayment is an additional payment you make over your regular monthly mortgage payments. Overpayments can be made as a one-off lump sum, or you can overpay a regular amount each month.

Making overpayments on your mortgage means you can save on the total amount of interest you pay, which means you can potentially pay off your mortgage quicker too.

You need to bear in mind, however, that most mortgages will carry an early repayment charge during the deal period. The majority of lenders will allow some overpayments before you incur a charge, usually up to 10 per cent.

Always make sure to check with your lender how much you can overpay before making any overpayments. Your mortgage adviser will be able to assist you with this.

Offset your savings

If you have savings and prefer not to overpay your mortgage with them, they could still help you on your journey to mortgage freedom. With offset mortgages, your savings and mortgage are linked. You use the savings to ‘offset’, or, reduce, the amount of interest you’re charged on your mortgage.

And you’ll have access to your savings whenever you need them. However, bear in mind you won’t earn interest on your savings, and interest rates on these mortgages can be higher.

Get a lodger

You could give your income a serious boost if you have a room you can rent out. If you rent out a room in your home, you could take advantage of the UK Government’s Rent a Room scheme. This allows homeowners (who rent out rooms in their homes) to earn up to £7,500 per year before having to pay any tax on the income.

The limit of £7,500 is for individuals. If you share income from the property with another person, you can only claim up to £3,750 each.

To qualify to use the scheme, you must offer fully-furnished accommodation in your main home. Remember to get permission from your mortgage provider before starting. You’ll also need permission from your home insurance provider too.

If you choose to do this and put all the money towards paying off your mortgage, it could make a huge difference.

Consider your priorities

When it comes to your finances, it’s important to have a plan. If your goal is to become mortgage free as quickly as possible, you may choose to cut out all luxuries like holidays and meals out and put every spare penny into paying off your mortgage, while someone else may want to keep their holidays but forgo getting a new car.

The key is to get the right balance for you. The best thing to do is to sit down and make a budget and plan what you’re going to spend your cash on.

Get in touch with me on 07375 886347 and I’ll be happy to help. Or visit our website at mortgageadvicebureau.com/cambridge.

Because we play by the book, we want to tell you that your home may be repossessed if you do not keep up with repayments on your mortgage. There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances, but a typical fee is up to one per cent of the amount borrowed.

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