Mortgage Freedom

Paying off your mortgage early can be a wise financial decision. While you are obligated to pay back your mortgage, choosing to make overpayments each month or adding a lump sum payment to your mortgage can help reduce the amount you owe. To make overpayments, some lenders may require you to apply first, but it’s always worth asking if you’re unsure.

By making overpayments, you may be able to shorten the length of your loan term or lower your monthly payment amount, ultimately saving you money in the long run. If you’re are keen to overpay on your mortgage, the approach you take is entirely up to you.

You have the option of using your monthly wages to make overpayments, paying a lump sum from your ISA or freeing up some money from investments. Nonetheless, it’s worth remembering that seeking professional mortgage advice is important to understand what’s best for you.

ALLOCATING ANY OVERPAYMENTS

It’s also worth noting that you may opt for an interest-only mortgage, which means you’ll only have to pay off the interest on your loan each month. However, you’ll have to devise a strategy to pay off the entire amount owed by the end of your term. Nonetheless, you may discuss the possibility of allocating any overpayments to the entire amount owed with your lender, which will reduce your monthly interest payments. While the interest-only strategy works for many people, it’s important to identify the option that is best suited for your situation.

REALISTIC STARTING POINT

With your mortgage adviser, you can establish a suitable budget for your repayments before you start considering overpayments. This allows you to determine how much you are capable of paying on a monthly basis, providing a realistic starting point. If you wish to overpay, you need to understand what is feasible for you. The majority of lenders allow up to 10% of your balance being repaid annually, while some may permit more. However, be aware that there may be an early repayment fee for doing so.

CLARIFICATION OF THE TERMS

Your lender may also have limitations on the amount you can overpay until your fixed-term mortgage comes to an end. In case of any uncertainty, always consult your mortgage adviser for clarification of the terms. If you’re looking to take a break from paying your mortgage, some mortgages offer a payment holiday option that can be applied for in advance. This option typically provides a break of one month, six months or a year where you won’t have to make any payments.

CHECKING WITH YOUR LENDER

However, it’s important to note that each lender has their own criteria for who can take advantage of this option and when. Additionally, lenders may still charge interest during this period, which could result in higher monthly payments following the holiday. If you’re uncertain about whether or not this option is right for you, it’s worth checking with your lender.

Have you considered which type of mortgage would suit you best? If you’re in the process of purchasing a new home and have plans for making repayments in the future, it’s important to explore the various options available.

MORTGAGE TYPE YOU SELECT

For instance, tracker mortgages change in accordance with interest rates, while fixed rate mortgages allow you to pay a predetermined amount for a certain period (usually two to five years). It’s worth bearing in mind that the ultimate decision is entirely up to you.

Regardless of the mortgage type you select or the repayment method you choose, it’s necessary for your unique situation to align with your choice, and you may want to seek professional mortgage advice if you’re uncertain.

Don’t forget, our professional friendly advisers are on hand to support you and can help you explore all of your options.