Paying off your home loan faster can be a great way to save money. It reduces your interest, and the time it takes to finish payment, ultimately saving significant money in the long run. Unfortunately, research reveals that a large number of home buyers are slow to pay their mortgages, as over 750,000 UK households risk defaulting on them. While it is vital to learn how much you can afford for your mortgage, you can do a few things to quickly pay if off and have more control over your finances. Below are four ways to speed up your mortgage repayments and enjoy financial freedom with peace of mind.
- Make overpayments
Making overpayments on your mortage is one of the simplest and most effective ways to reduce the interest you pay. It also helps you decrease the time it takes to pay off your mortgage. Most UK lenders allow you to make overpayments of up to 10% of the total mortgage amount each year without incurring any early repayment fees. Overpayment can be a great way to clear a mortgage and save money. However, it would be best to ensure any extra money you spend goes toward debt reduction and shortening the period rather than lowering your monthly payments.
- Find extra cash
It is easy to quickly repay your mortage if you have the funds and wouldn’t have much issue committing to repayment. Unfortunately, you can’t do this if you are buried in many financial liabilities yet with limited finances. At this point, the best approach is to find extra cash for your loan. You may consider taking on a side hustle or a second job to generate additional income. Alternatively, you could figure out ways to reduce your expenses and free up more money for your mortage. You may also consider making money from selling things you no longer need or taking on odd jobs or freelance work.
- Make lump sum payments
A lump sum payment may influence your mortage and savings, similar to overpayments. Lump sum payment, especially at the beginning of your mortage, can significantly impact the overall interest paid. If you receive a bonus or inheritance, you could put this towards your mortgage and reduce the time it takes to pay off your loan. Fortunately, you can use many online tools to measure your lump sum payment impact on your mortage length and interest paid. You can also talk to your mortgage broker to learn whether lump sum payments can be applied to your mortage product.
- Switch to a shorter-term mortage
Switching to a shorter-term mortage can be a great way to reduce the interest you pay, and the time it takes to complete payment. It may cover a 5 to 10-year fixed rate payment. However, shorter-term mortgages often come with higher monthly payments, so you must ensure you can afford them before making the switch. Moreover, you may have to pay early repayment fees when switching to a shorter-term mortage, so checking with your lender before making the switch is critical.
If you have more disposable income, you can combine two or more methods to repay your mortage sooner. After all, every little saved is a penny gained in personal finance.