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How to pay my mortgage early

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How to pay my mortgage early

Getting into loans and signing an agreement can be overwhelming. The thoughts that how will you manage your regular budget and savings can be a hard-hitting moment. All this can be anxiety-free if you have signed the mortgage based on your requirement and capacity. An expert can help you in deciding these. Living a mortgage/debt-free life is a dream for everyone. The amount you can save after achieving debt-free status will have an option to get multiplied by various interest rates offered on savings. In this article, we will try to jot down a few points which can help you in achieving this. We also try to point out the pros and cons of this because in some cases this is not a smart move.

Should I pay my mortgage off early?

The first important point we suggest everyone should keep 3-6 months’ emergency funds always whether or not going for getting a mortgage loan. It should not be the case that life gets trapped in a hand to mouth situation if the interest rate deviates slightly. Paying a mortgage off early will then make sense that even after paying it you still have some money saved for your emergency use. If you try to pay it off early by liquidating every asset you have then you won’t be left with anything as collateral in case of emergency. The uncalled expenses are never planned and therefore we should be ready with anticipation and plan.

Checklist for the early repayment plan?

  •     If you have an array of debts on you, then identify the debt which needs to go out first. These debts can be the ones with high interest rates to start. It will make no sense in paying the debts which is not the major part of your repayment chunk. Saving on such debts can give you a nice payoff in the long run. However, some people go with the smaller debts first to get the motivation. Whatever option you choose you need to be aware of the prepayment penalty which some of the lender charges.
  •  Prepayment penalty, also known as Early repayment charges, is a penalty borne by the borrower in an event when paying off the debt before the maturity date. It can be a significant amount. Generally, this penalty is applied on a full payment within the 3 years of the payment cycle. This is also applied if you try to remortgage the mortgage within the first few years. This is as we are mentioning again can be a significant amount and needs to be sorted out with your lender first.
  • If you are planning to pay off the mortgage at one go, you make sure that you have enough funds in an emergency to handle your expenses for another 3-6 months.
  • And if you are planning to increase the monthly repayment amount, make sure whatever you are paying extra should be deducted from the principal amount and not from the interest.
  • And above all, talk to a mortgage advisor before going ahead with any of the plans.

How to motivate yourself

Unless you wake up someday and find that your forefather left you an estate in Scotland which is now worth billions, all such plans need rigorous discipline and self-control. This of course pays off in the future in the form of huge financial relief.

Few of the ways to start with

  1.     Saving/Earning Extra and Paying that extra towards your mortgage

Money saved is money earned, the timeless saying stands relevant for every person on this earth. Every penny saved counts and helps you in moving towards your goal. Making an extra payment towards your principal is again the popular choice by many households. This will reduce the amount you spend on interest. It’s a simple logic, the smaller the principal the less the interest.

What happens if you pay an extra £100 towards the principal every month? This would help you pay off your mortgage 7 years earlier, according to one survey.


  1.     Remortgage Your Mortgage

Sounds complicated! but with the help of an expert, you will be able to save in a couple of ways. Refinancing to a shorter-term will help you repay loans early. Remortgaging it with mortgages of lower interest rates can help you to save on your monthly payment. If you are aware of your financial situation and confident about your payment abilities, then refinancing the mortgage can be a smarter way. Finding a lower interest option can be a difficult task but with an expert helping you with that, it can be solved in a day.

Pros of paying your mortgage off early

  • Of course you will be saving a lot on interest Just make sure with the lender that your extra payment goes for a deduction on principal. The extra cash flow you are having can be used for saving for the next house or for your child’s education.
  •  And you have a home! A place where you can always come back and can proudly say that it’s yours. There are no ways you are losing the house once you are done with your mortgage. That gives a different kind of peace and security. The motivation which debt-free life provides is another worldly happiness.

Cons of paying your mortgage off early

  • You will lose the advantage of mortgage interest tax deduction. You probably have to pay more tax when your mortgage gets over and in hand salary increase
  • Prepayment Penalties, as mentioned earlier can be a significant amount. So understand this math from an expert and then go ahead with early payment.
  •  There are few financial instruments where you can invest and get returns which will help you to increase your savings. So instead of putting that extra amount for loan repayment, investing in such instruments can be beneficial. But please be informed that instruments with higher returns do come with the highest risk. So invest only after consulting with an expert.

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