At a glance

  • There are a number of ways to speed up the mortgage repayment process, including reducing the term of your mortgage
  • It is possible to remortgage for a better deal, but check for any costs or potential penalties first
  • Other ways to repay your mortgage early include offset mortgages and using windfalls to pay off your debt
  • Bear in mind that paying off your mortgage early may not always be the best option – for example if you have other debts charging a higher rate of interest

At a glance

  • There are a number of ways to speed up the mortgage repayment process, including reducing the term of your mortgage
  • It is possible to remortgage for a better deal, but check for any costs or potential penalties first
  • Other ways to repay your mortgage early include offset mortgages and using windfalls to pay off your debt
  • Bear in mind that paying off your mortgage early may not always be the best option – for example if you have other debts charging a higher rate of interest

At a glance

  • There are a number of ways to speed up the mortgage repayment process, including reducing the term of your mortgage
  • It is possible to remortgage for a better deal, but check for any costs or potential penalties first
  • Other ways to repay your mortgage early include offset mortgages and using windfalls to pay off your debt
  • Bear in mind that paying off your mortgage early may not always be the best option – for example if you have other debts charging a higher rate of interest

For many people, being mortgage-free is one of their most important financial life goals. Not having to worry about monthly repayments and knowing you own your home outright are key objectives for many people.

The advantage of paying off your mortgage is that you will reduce the overall cost of your home loan. If you have a repayment mortgage, you will pay off a portion of the underlying loan each month (known as the capital) plus the interest on the loan. By paying off the capital earlier, you will save on the interest costs you must pay over time.

How long does it take to pay off a mortgage?

Most mortgages have a 25-year term, but the term can be shorter or longer.1 By the end of the term, you should have paid off all of the interest and capital.

This is not the case if you have an interest-only mortgage, where you pay only the interest on the underlying loan, and none of the loan itself until the end of the term. If you have an interest-only mortgage, you should have a plan for how you will repay the mortgage debt in full at the end of the term.

By the time you have repaid your mortgage, you will have repaid the original sum you have borrowed, plus the interest. It makes sense that if you pay interest for a shorter period, you could see significant savings.

How can I pay my mortgage off early?

There are a number of ways you can speed up the process of becoming mortgage-free.

  • Reduce the term of your mortgage – for example from 25 years to 15 years. This will increase the amount of your monthly repayment but will reduce the overall interest you pay.
  • Shop around for a better mortgage deal – this could enable you to pay a lower interest rate than the one on your current mortgage. If you do decide to remortgage, check the terms and conditions of your existing mortgage first.
  • Overpay your mortgage – keep the existing term but pay more than the minimum repayment amount each month.

How do I reduce the term of my mortgage?

You can do this when you first arrange your mortgage, or when you are remortgaging. Lenders will only allow you to opt for a shorter term if they believe that you will be able to meet these higher costs and cope financially. This will mean that you will need to meet the criteria in their affordability tests.

Before you shorten your mortgage term, check there are no penalty fees for doing so.

How do I remortgage for a better deal?

When you first take out a mortgage, your interest rate may be fixed or capped for a period of time, for example two or five years. After this, your mortgage rate may revert to a floating rate that is known as the lender’s standard variable rate (SVR). The lender can and does change this rate up or down depending on economic conditions. If you are on the SVR, you may be paying a higher rate, and you won’t have certainty about your rate over the longer term.

The way around this is to remortgage – finding another deal before your current fixed term ends. You can ask your current lender if they have any deals on offer, and you can also shop around to see what other banks and building societies are offering.

It is important to check a couple of things before you remortgage:

  • Are there any fees or penalties for switching to a different deal? Check the terms and conditions of your current mortgage.
  • What are the costs involved in moving to another lender, and do they outweigh the savings you will make? Don’t forget to factor in the cost of any fees charged by a mortgage broker or your new lender, and the time involved in making the application and waiting for it to be processed.

How do I overpay my mortgage?

Not all lenders allow you to overpay your mortgage, so you need to check first with your mortgage provider. Making payments above the minimum is a good way to reduce your mortgage debt over time, but be sure you can afford to do it.

Don’t forget that mortgage debt is relatively inexpensive when compared with rates on personal loans, credit cards and bank overdrafts. So don’t stretch yourself financially to pay off your mortgage and then find yourself relying on more expensive forms of debt to make ends meet.

Check with your lender how much you are allowed to overpay, and ask how the overpayments are applied – some calculate interest immediately after you have made the extra payment, whereas others reassess your mortgage debt monthly or annually.

Other ways to repay your mortgage early

Offset mortgage

These types of mortgages were popular when interest rates were higher. They are less popular now with interest rates at an historic low, but they can be a useful financial tool for some people.

An offset mortgage links your current account or savings account with your mortgage account. When you have a credit balance in your bank account, the money is offset against your mortgage debt.

In other words, if you have £10,000 in your account, this will reduce the overall mortgage debt that you pay interest on by £10,000.

Offset mortgages can be useful for people who receive lump sum payments, for example freelance workers, or those whose income is erratic. The advantage is that you will pay less interest over time if you keep your bank balance in credit.

Right now, with savings rates barely keeping pace with inflation, this could be a more financially astute move, as mortgage rates are higher than savings rates. However, you do need to be financially disciplined as you will need to keep a reasonable credit balance in order to make it worthwhile.

Keep a close eye on costs

When you are first setting up a mortgage you can save money by paying off the cost of the mortgage fees at the start, rather than adding them to the overall mortgage debt. If you choose to do this, you will need to build in the extra costs into your budget for moving and buying.

Try to save up as large a deposit as you can

Many first-time buyers struggle to get on the housing ladder, often taking 95% mortgages, which means they only put down a 5% deposit.

Bear in mind that if you do this, the deal you receive is likely to be less competitive, and your interest rate will be higher. If you can, try to save up as large a deposit as possible. This will help you get a wider choice from lenders and a better deal.

Use windfalls to reduce your mortgage debt

If you receive a lump sum, such as a bonus at work, or from inheritance or as a gift, you can use that to pay off some of your underlying mortgage debt.

This might also be an option for those who are retiring and who want to use their tax-free cash lump sum to pay off the remainder of their mortgage. If you are considering doing this, it is best to take financial advice, as any further withdrawals from your pension might incur a tax charge.

When should I not pay off my mortgage early?

Mortgage debt is relatively cheap, so there are a couple of scenarios where it might be better not to pay it off early:

  • If you have a lot of other debts charging a higher rate of interest – for example credit cards. Pay these off first before paying off your mortgage.
  • If you don’t have any savings. It is a good idea to have at least three months’ worth of household expenses in a rainy-day account in case you need it for a financial emergency.
  • If your mortgage terms mean that you will be charged a fee for paying it off early. Fees can be hefty and often equivalent to the interest you would have paid anyway.

 

Your home may be repossessed if you do not keep up repayments on your mortgage.

For many people, being mortgage-free is one of their most important financial life goals. Not having to worry about monthly repayments and knowing you own your home outright are key objectives for many people.

The advantage of paying off your mortgage is that you will reduce the overall cost of your home loan. If you have a repayment mortgage, you will pay off a portion of the underlying loan each month (known as the capital) plus the interest on the loan. By paying off the capital earlier, you will save on the interest costs you must pay over time.

How long does it take to pay off a mortgage?

Most mortgages have a 25-year term, but the term can be shorter or longer.1 By the end of the term, you should have paid off all of the interest and capital.

This is not the case if you have an interest-only mortgage, where you pay only the interest on the underlying loan, and none of the loan itself until the end of the term. If you have an interest-only mortgage, you should have a plan for how you will repay the mortgage debt in full at the end of the term.

By the time you have repaid your mortgage, you will have repaid the original sum you have borrowed, plus the interest. It makes sense that if you pay interest for a shorter period, you could see significant savings.

How can I pay my mortgage off early?

There are a number of ways you can speed up the process of becoming mortgage-free.

  • Reduce the term of your mortgage – for example from 25 years to 15 years. This will increase the amount of your monthly repayment but will reduce the overall interest you pay.
  • Shop around for a better mortgage deal – this could enable you to pay a lower interest rate than the one on your current mortgage. If you do decide to remortgage, check the terms and conditions of your existing mortgage first.
  • Overpay your mortgage – keep the existing term but pay more than the minimum repayment amount each month.

How do I reduce the term of my mortgage?

You can do this when you first arrange your mortgage, or when you are remortgaging. Lenders will only allow you to opt for a shorter term if they believe that you will be able to meet these higher costs and cope financially. This will mean that you will need to meet the criteria in their affordability tests.

Before you shorten your mortgage term, check there are no penalty fees for doing so.

How do I remortgage for a better deal?

When you first take out a mortgage, your interest rate may be fixed or capped for a period of time, for example two or five years. After this, your mortgage rate may revert to a floating rate that is known as the lender’s standard variable rate (SVR). The lender can and does change this rate up or down depending on economic conditions. If you are on the SVR, you may be paying a higher rate, and you won’t have certainty about your rate over the longer term.

The way around this is to remortgage – finding another deal before your current fixed term ends. You can ask your current lender if they have any deals on offer, and you can also shop around to see what other banks and building societies are offering.

It is important to check a couple of things before you remortgage:

  • Are there any fees or penalties for switching to a different deal? Check the terms and conditions of your current mortgage.
  • What are the costs involved in moving to another lender, and do they outweigh the savings you will make? Don’t forget to factor in the cost of any fees charged by a mortgage broker or your new lender, and the time involved in making the application and waiting for it to be processed.

How do I overpay my mortgage?

Not all lenders allow you to overpay your mortgage, so you need to check first with your mortgage provider. Making payments above the minimum is a good way to reduce your mortgage debt over time, but be sure you can afford to do it.

Don’t forget that mortgage debt is relatively inexpensive when compared with rates on personal loans, credit cards and bank overdrafts. So don’t stretch yourself financially to pay off your mortgage and then find yourself relying on more expensive forms of debt to make ends meet.

Check with your lender how much you are allowed to overpay, and ask how the overpayments are applied – some calculate interest immediately after you have made the extra payment, whereas others reassess your mortgage debt monthly or annually.

Other ways to repay your mortgage early

Offset mortgage

These types of mortgages were popular when interest rates were higher. They are less popular now with interest rates at an historic low, but they can be a useful financial tool for some people.

An offset mortgage links your current account or savings account with your mortgage account. When you have a credit balance in your bank account, the money is offset against your mortgage debt.

In other words, if you have £10,000 in your account, this will reduce the overall mortgage debt that you pay interest on by £10,000.

Offset mortgages can be useful for people who receive lump sum payments, for example freelance workers, or those whose income is erratic. The advantage is that you will pay less interest over time if you keep your bank balance in credit.

Right now, with savings rates barely keeping pace with inflation, this could be a more financially astute move, as mortgage rates are higher than savings rates. However, you do need to be financially disciplined as you will need to keep a reasonable credit balance in order to make it worthwhile.

Keep a close eye on costs

When you are first setting up a mortgage you can save money by paying off the cost of the mortgage fees at the start, rather than adding them to the overall mortgage debt. If you choose to do this, you will need to build in the extra costs into your budget for moving and buying.

Try to save up as large a deposit as you can

Many first-time buyers struggle to get on the housing ladder, often taking 95% mortgages, which means they only put down a 5% deposit.

Bear in mind that if you do this, the deal you receive is likely to be less competitive, and your interest rate will be higher. If you can, try to save up as large a deposit as possible. This will help you get a wider choice from lenders and a better deal.

Use windfalls to reduce your mortgage debt

If you receive a lump sum, such as a bonus at work, or from inheritance or as a gift, you can use that to pay off some of your underlying mortgage debt.

This might also be an option for those who are retiring and who want to use their tax-free cash lump sum to pay off the remainder of their mortgage. If you are considering doing this, it is best to take financial advice, as any further withdrawals from your pension might incur a tax charge.

When should I not pay off my mortgage early?

Mortgage debt is relatively cheap, so there are a couple of scenarios where it might be better not to pay it off early:

  • If you have a lot of other debts charging a higher rate of interest – for example credit cards. Pay these off first before paying off your mortgage.
  • If you don’t have any savings. It is a good idea to have at least three months’ worth of household expenses in a rainy-day account in case you need it for a financial emergency.
  • If your mortgage terms mean that you will be charged a fee for paying it off early. Fees can be hefty and often equivalent to the interest you would have paid anyway.

 

Your home may be repossessed if you do not keep up repayments on your mortgage.

For many people, being mortgage-free is one of their most important financial life goals. Not having to worry about monthly repayments and knowing you own your home outright are key objectives for many people.

The advantage of paying off your mortgage is that you will reduce the overall cost of your home loan. If you have a repayment mortgage, you will pay off a portion of the underlying loan each month (known as the capital) plus the interest on the loan. By paying off the capital earlier, you will save on the interest costs you must pay over time.

How long does it take to pay off a mortgage?

Most mortgages have a 25-year term, but the term can be shorter or longer.1 By the end of the term, you should have paid off all of the interest and capital.

This is not the case if you have an interest-only mortgage, where you pay only the interest on the underlying loan, and none of the loan itself until the end of the term. If you have an interest-only mortgage, you should have a plan for how you will repay the mortgage debt in full at the end of the term.

By the time you have repaid your mortgage, you will have repaid the original sum you have borrowed, plus the interest. It makes sense that if you pay interest for a shorter period, you could see significant savings.

How can I pay my mortgage off early?

There are a number of ways you can speed up the process of becoming mortgage-free.

  • Reduce the term of your mortgage – for example from 25 years to 15 years. This will increase the amount of your monthly repayment but will reduce the overall interest you pay.
  • Shop around for a better mortgage deal – this could enable you to pay a lower interest rate than the one on your current mortgage. If you do decide to remortgage, check the terms and conditions of your existing mortgage first.
  • Overpay your mortgage – keep the existing term but pay more than the minimum repayment amount each month.

How do I reduce the term of my mortgage?

You can do this when you first arrange your mortgage, or when you are remortgaging. Lenders will only allow you to opt for a shorter term if they believe that you will be able to meet these higher costs and cope financially. This will mean that you will need to meet the criteria in their affordability tests.

Before you shorten your mortgage term, check there are no penalty fees for doing so.

How do I remortgage for a better deal?

When you first take out a mortgage, your interest rate may be fixed or capped for a period of time, for example two or five years. After this, your mortgage rate may revert to a floating rate that is known as the lender’s standard variable rate (SVR). The lender can and does change this rate up or down depending on economic conditions. If you are on the SVR, you may be paying a higher rate, and you won’t have certainty about your rate over the longer term.

The way around this is to remortgage – finding another deal before your current fixed term ends. You can ask your current lender if they have any deals on offer, and you can also shop around to see what other banks and building societies are offering.

It is important to check a couple of things before you remortgage:

  • Are there any fees or penalties for switching to a different deal? Check the terms and conditions of your current mortgage.
  • What are the costs involved in moving to another lender, and do they outweigh the savings you will make? Don’t forget to factor in the cost of any fees charged by a mortgage broker or your new lender, and the time involved in making the application and waiting for it to be processed.

How do I overpay my mortgage?

Not all lenders allow you to overpay your mortgage, so you need to check first with your mortgage provider. Making payments above the minimum is a good way to reduce your mortgage debt over time, but be sure you can afford to do it.

Don’t forget that mortgage debt is relatively inexpensive when compared with rates on personal loans, credit cards and bank overdrafts. So don’t stretch yourself financially to pay off your mortgage and then find yourself relying on more expensive forms of debt to make ends meet.

Check with your lender how much you are allowed to overpay, and ask how the overpayments are applied – some calculate interest immediately after you have made the extra payment, whereas others reassess your mortgage debt monthly or annually.

Other ways to repay your mortgage early

Offset mortgage

These types of mortgages were popular when interest rates were higher. They are less popular now with interest rates at an historic low, but they can be a useful financial tool for some people.

An offset mortgage links your current account or savings account with your mortgage account. When you have a credit balance in your bank account, the money is offset against your mortgage debt.

In other words, if you have £10,000 in your account, this will reduce the overall mortgage debt that you pay interest on by £10,000.

Offset mortgages can be useful for people who receive lump sum payments, for example freelance workers, or those whose income is erratic. The advantage is that you will pay less interest over time if you keep your bank balance in credit.

Right now, with savings rates barely keeping pace with inflation, this could be a more financially astute move, as mortgage rates are higher than savings rates. However, you do need to be financially disciplined as you will need to keep a reasonable credit balance in order to make it worthwhile.

Keep a close eye on costs

When you are first setting up a mortgage you can save money by paying off the cost of the mortgage fees at the start, rather than adding them to the overall mortgage debt. If you choose to do this, you will need to build in the extra costs into your budget for moving and buying.

Try to save up as large a deposit as you can

Many first-time buyers struggle to get on the housing ladder, often taking 95% mortgages, which means they only put down a 5% deposit.

Bear in mind that if you do this, the deal you receive is likely to be less competitive, and your interest rate will be higher. If you can, try to save up as large a deposit as possible. This will help you get a wider choice from lenders and a better deal.

Use windfalls to reduce your mortgage debt

If you receive a lump sum, such as a bonus at work, or from inheritance or as a gift, you can use that to pay off some of your underlying mortgage debt.

This might also be an option for those who are retiring and who want to use their tax-free cash lump sum to pay off the remainder of their mortgage. If you are considering doing this, it is best to take financial advice, as any further withdrawals from your pension might incur a tax charge.

When should I not pay off my mortgage early?

Mortgage debt is relatively cheap, so there are a couple of scenarios where it might be better not to pay it off early:

  • If you have a lot of other debts charging a higher rate of interest – for example credit cards. Pay these off first before paying off your mortgage.
  • If you don’t have any savings. It is a good idea to have at least three months’ worth of household expenses in a rainy-day account in case you need it for a financial emergency.
  • If your mortgage terms mean that you will be charged a fee for paying it off early. Fees can be hefty and often equivalent to the interest you would have paid anyway.

 

Your home may be repossessed if you do not keep up repayments on your mortgage.

References

1. Mortgages – a beginner’s guide, The Money Advice Service

References

1. Mortgages – a beginner’s guide, The Money Advice Service

References

1. Mortgages – a beginner’s guide, The Money Advice Service

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