Ways to shorten your mortgage term

Paying off your mortgage early is a very good idea, but it isn't always that simple...

12:48 28 October 2013

Settling your mortgage ahead of the original term is definitely advantageous as it could realise big savings.  You can do this by paying more than the required repayment amount or paying in lump sum whenever you have extra money.  This will shorten the terms of payment and lessen the interest charges you have to pay per year.

Repaying your mortgage is a good idea

You can save thousands of pounds and it will allow to you enjoy a mortgage-free life earlier than scheduled.  The saved money can be spent on other things which are equally important to you.

However, there are instances where using your extra cash or savings to pay for mortgage will not turn out to be more beneficial; one is if you have other expensive loans like credit card charges which you have not been paying in full.  Paying for this kind of expensive kind of loan should be given more priority because of its exorbitant refinancing fees which can come to about 42% or more per annum.

It could be that it is not often that you come by extra income and would just want to hold on to your extra cash as an emergency fund which can be used for eventualities or for venturing on some investment opportunities that can increase your wealth.

 

Ways to cut down the terms of mortgage

Overpayments

One of the simplest ways to whittle down your mortgage outstanding is by paying more than what is due.  Know the rules of overpayment as some lending institutions set a minimum or a maximum amount of overpayment you can make each month. Find out as well if your overpayments are applied immediately or will it be still be reckoned by the end of the year.

Lump Sum Payment

If you have a big amount of money coming to you such as inheritance, commissions or maturing investments, you may want to pay a sizeable amount of your mortgage.  Check the lender’s policy on early repayments as there will charges for sure.