Can You Pay Off a Mortgage Early?
Whether you’re just starting out on your home-buying journey and you’re curious or you’re in the fortunate position where you can pay your mortgage off in full, this article is exploring whether you can pay off a mortgage early. We’re also looking at the pros and cons for paying off your loan before it’s due.
They can certainly help cut the amount of interest you pay over your mortgage lifetime if you pay it off early. Reduce the interest and repayment term. By speaking to a mortgage advisor, they could help you budget for an early mortgage repayment and help you decide whether it’s the right course of action for you.
How much can I overpay on my mortgage?
Many lenders allow you to overpay 10% of your yearly mortgage balance. This usually applies if you’re still in your introductory fixed period. However, if you’re on a tracker mortgage, or paying your lender’s standard variable rate (SVR), you can usually overpay by as much as you want.
The downside of this is that many SVRs are expensive.
Where repayment fees are on the more expensive side, it can be worth seeking a remortgage instead.
Is paying off a mortgage early as good as it sounds?
Mortgages typically take between 25 and 40 years to pay off. On the surface, paying off a mortgage early might sound like an ideal scenario. Most homeowners dream of having a space that belongs to them outright, with the freedom to spend their hard-earned cash on something other than those mortgage repayments.
It’s important to bear in mind that some lenders will charge overpayment fees. You will need to consider these fees to weigh up whether the overall savings are really worth it. You can check how much these fees are with your lender.
Other considerations
There are other considerations, including prioritising paying back any more expensive debts that you have accrued first.
If you’re saving hard to pay back your mortgage early, you will want to think carefully about what you’re sacrificing for the sake of becoming mortgage-free sooner. There are things that are still worth paying into for your future, including your pension.
Top Tip:
It can be worth strategically overpaying when interest rates are low. If interest rates rise, you will then have a smaller loan to pay interest on, which will help you save money in the long run. It’s important to get the timing right – if you need professional advice, it’s always worth consulting your mortgage advisor.
Final thoughts
While most mortgages allow you to make overpayments to help you become mortgage-free sooner, there are some key things to consider and question before choosing this option. From checking how much the repayment fees are, to seeing whether you could remortgage onto a more favourable plan, a mortgage advisor can help you decide whether the benefits of an early mortgage repayment outweighs the cons.
Want to get professional advice on whether it’s worth paying off your mortgage early? Get in touch with Agentis Financial, an expert mortgage broker Peterborough, today to book your free initial consultation.