It looks likely that interest rates may well increase this year and all the signs are there. Those on variable rate mortgages could do well to remortgage to a fixed rate deal if they want to avoid feeling the blow of every increase. Many of us would love to live without a mortgage, but of course paying a mortgage off in advance is something we have to work hard to do – particularly if we stretched ourselves to get the mortgage in the first place.
Last weekend, we talked about the BBC series Pay Off Your Mortgage In Two Years and discussed the pros and cons of the practice. Only two of the eight couples did manage it within the timescale, but they all cut plenty of time and saved a lot of interest in the process, so if you want to pay off your mortgage faster – whether that’s in two years or just faster – how do you pay your mortgage off? Here are our top tips:
Step 1: Pay off your debts
A mortgage is probably the cheapest loan, in terms of interest, that you could get so start by looking at any other debts you have. These should be your top priority
Step 2: Get a safety net in place
Most experts recommend you should have at least six months salary in the bank in case of unexpected emergencies. Unless you have an offset mortgage or a mortgage where you can get overpayments out without notice, you’ll need this in case of redundancy or personal issues.
Step 3: Overpay your mortgage
Check your mortgage terms. Some restrict how much you can overpay within a period. If this is the case, get a good high interest savings account for the overpayments for now.
Step 4: Minimise outgoings
Shop round for the cheapest deals on everything – your utility bills, car insurance, house insurance and anything else. Looks at everything you spend your money on. Could you do without your daily latte, your gym membership, your weekly newspaper or any other unnecessary outgoing? Calculate how much you’d save over the year and make those savings. Pay all the extra savings into your mortgage.
Step 5: Maximise your income
Could you turn a hobby into a part-time business? Could you get a part-time job or do overtime at work? Perhaps you could do some babysitting or gardening for neighbours and sell any belongings you don’t need that you just hanging round the house. Look at every way of earning more money and pay the extra into your mortgage.
Every little step helps and by overpaying just a small amount each month can save months and years off your mortgage.
