I’ve been making noises about paying my mortgage off early for a good few years now and although I have made some small overpayments to help with that aim, I’ve never really fully committed to the idea. This year though, one of my goals is to make significant progress to reduce my mortgage and today I’m going to tell you exactly how I plan to do that…
There’s lots of advice about whether repaying your mortgage early is beneficial here but to me, it’s a no-brainer when I consider our family finances as they are right now. To give you an idea of how much difference paying a lump sum would make I’m going to share with you one stat from the Money Advice Service website – on a mortgage of 150k at an interest rate of 5% over 25 years, an overpayment of £5000 would reduce your mortgage by 18 months and would reduce the amount you pay by around 11k!
Make regular overpayments
If your mortgage company allows you to without additional charges then you can set up a Standing Order to make a regular overpayment every month. Using the same mortgage details as above, you would repay your mortgage 7 years and 7 months earlier if you were to pay £200 extra a month, saving more than £38,000 in interest payments. Obviously, not everyone can afford an extra £200 a month but even £20 a month would save a full year and almost £6000 in interest so whatever you can afford will definitely help. There’s a great calculator over on the MSE website if you want to have a play with the figures and personalise them to your own mortgage details.
Make sure you weren’t mis-sold your mortgage
If you have been sold a mortgage after the 1st November 2004 through a broker then you could find that the Mortgage has been mis-sold. I was completely unaware of this until recently but the rules governing the sale of mortgages state clearly that the lenders and brokers must make sure that the mortgage product that you are taking out – is affordable – not only at the time of sale but throughout the whole term of the mortgage, even if that means into retirement.
If it can be established that the mortgage was mis-sold then you may have a claim for losses from the start of the mortgage to date, and through to the full term of the mortgage which could be a significant amount. I’m not the best person to advise on this one but I’ve just filled in a super quick form over on Claimyourmortgage.co.uk and they’re sending me a pack out to see if I have a claim. I’d definitely give it a try if I were you – nothing ventured, nothing gained.
We were definitely allowed to overstretch ourselves when we first bought this house as we did have credit card debt and in order to afford the repayments at the time, we were advised to take our mortgage over 30 years rather than 25. The 30-year timescale also meant that the mortgage would end the year after Mr Frugal would have retired and a couple of years after I would have retired bearing in mind that I think the retirement age for women was 60 at the time.
A lump sum from a claim payout here would definitely help with my goal of repaying early as I would obviously put any amount back into my mortgage as an overpayment.
Shop around for a better rate
If you’ve been on the same mortgage for a few years now and you’re no longer in the initial offer period then you should be able to find a better deal out there which will save you money. This is the next thing on my list to help me repay my mortgage early but when I do save money on the monthly payment, I plan to overpay by the amount I save in addition to my overpayment that I’m paying now.
I’m determined that I’m going to pay my mortgage off early so wish me luck and I’ll keep you updated!
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