Imagine the prospect of mortgage-free life: no hefty monthly repayments, extortionate interest rates or binding 25 year contract… not to mention the emotional freedom and peace of mind you’ll have.
A mortgage is one of the most substantial expenses most people will have in their lifetime, and it’s the dream of many to live mortgage-free before they reach retirement.
But short of transforming an abandoned canal boat or shipping container into your dream home (see Sarah Beeny’s “How to Live Mortgage-free” for more out-there methods adopted by some dedicated Brits), there must surely be a few tips to help the average homeowner avoid a lifetime of mounting debt?
Fortunately, you’ve come to the right place. We’ll be sharing some ideas on how to pay off your mortgage quicker, and even exploring a couple of options on how to avoid a mortgagealtogether.
Set yourself a target settlement date
If you don’t have the cash to pay off your mortgage in full, do some calculations to work out exactly how quickly you can realistically pay off your mortgage, and set yourself a target date.
If, for example, your goal is to pay off your mortgage in ten years, create a budget to assess how much you need to be earning every month, while taking into consideration your outgoings, to see whether this is an achievable goal.
If not, consider whether there are any cutbacks you can make on your outgoings, or set yourself a more realistic target – perhaps 12 – 15 years instead of ten.
Switch to fortnightly rather than monthly payments
Consider switching to bi-weekly rather than monthly mortgage repayments. In doing so you are actually increasing the frequency of the payments.
By opting to pay half the monthly fee every two weeks instead of once monthly, you end up repaying extra – perhaps without even realising you’re doing so.
As there are 52 weeks in a year, by following a fortnightly repayment schedule you end up making 13 full sized payments a year instead of the 12 you’d make by doing it monthly – genius!
Make extra principal payments
It might sound obvious, but one of the simplest ways to help you clear your mortgage debt is to reduce your principal balance as fast as possible by making additional principal payments.
So, rather than your payments going towards both principal and interest, they will be used to reduce only the principal amount owed. This can potentially save you a considerable amount in interest later on, and help you reduce your term length.
Many lenders offer “principal only” products – to find out which ones, get in touch and we’ll refer you to an expert.
Put any spare cash straight into your mortgage
If you receive any form of a windfall, such as a tax rebate, inheritance or bonus, put it straight towards an extra mortgage payment. If you receive a pay rise from work, consider contributing all the extra funds to paying off your home.
You won’t miss the money, and no matter how small the added contribution, it will still impact your mortgage schedule for the better in the long run.
Remortgage your property
Remortgaging is the process of paying off one mortgage with the proceeds from a new mortgage, using the same property as security. Often, the purpose to switch is to secure a more favourable interest rate from either the same or a different lender.
People usually remortgage to reduce their monthly payments, but it can also be an effective way of paying off a mortgage earlier. Keeping the payments the same after remortgaging to a lower interest rate allows you to shorten the overall loan term.
Of course, there are fees and costs associated with remortgaging, so ensure to take these into account before making a decision.
Build your own home
If you dream of living completely mortgage-free, you could consider building your own home – but you’re going to need time, patience, and the relevant know-how.
You can either use your own cash or get a short-term self-build mortgage. This type of loan usually lasts up to a year after the build is complete.
If you’re in the position to build your own home without using any loan at all, it’s an ideal, affordable option which could save you years and years of debt.
Get a lodger
Getting a lodger, or becoming an Airbnb host can be a fruitful venture. Of course, sharing your home with strangers may not appeal to everyone, but it can be a great way to contribute to your monthly mortgage payments.
While your lender may have some restrictions or conditions when it comes to subletting your property, it’s very much discretionary. Speak to your mortgage provider if this is something you’d consider exploring.
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