Could You Pay Off Your Mortgage Early?

by Adam on June 30, 2017

stamp duty change 2016The idea of living a mortgage-free life is part of the dream for many people, albeit one that might be far in the future. You imagine a sun-kissed retirement where you don’t have to worry about finding the money for rent or mortgage payments; where you have more disposable income as a result than you know what to do with. It’s a lovely idea to consider but, alas, for most people it’s one that will take many years of hard word to achieve.

However… maybe not. There is a school of thought among the financially savvy which suggests that everyone should aim to pay off their mortgage as quickly as possible. Not only will this save a fortune in interest payments, but it could give you a bedrock of financial security far earlier than you ever expected.

If you’re tempted to explore the idea further, then there’s a few things you’re going to need to know.

#1 – You Have To Be Certain Of Your Property

 

f you’re going to be taking big steps to try and pay off your mortgage early, then you need to be sure you’re getting a good deal.

Hopefully you conducted a survey prior to buying a house, but realistically, you probably didn’t: a shocking four-in-five buyers admitted to http://www.thisismoney.co.uk/ that they had bought their home without a survey.

Well, there’s no point crying over spilled milk – if you didn’t get a survey, you didn’t get one. If you’re going to take the steps required to pay off a mortgage early, however, then you need to get one now. You need to consult a construction expert and then the likes of http://www.argyllenvironmental.co.uk to ensure that the land your house sits on is in good condition.

Why do this? It’s simple: you don’t want to go to the effort of paying off your mortgage, only to discover it’s not worth as much as you paid for it. So get the surveys and the all clear before you proceed to the next step.

#2 – You Have To Be Committed

 

If you want to pay your mortgage off substantially early, then you have to be completely and absolutely ready to sacrifice a lot to do so. There’s very little point in paying your mortgage off a year or two early; it won’t make that much of a difference.

You should be aiming to shave at least five years off the repayment time; some people are even more ambitious, and aim for 10 years. It all depends on how your income relates to the size of the mortgage that you have and what you can realistically afford. For example, there’s no point trying to pay off a mortgage of £400,000 in 10 years if you only earn £20,000 per year – that’s just never going to work!

The commitment required to make a substantial difference is big. It means going without holidays, going without the most expensive luxuries in life – tightening belts and being careful with every penny you earn and how you spend it. Can you handle that?

Not only now, but can you handle that in a year’s time? How about five years? Scrimping and saving for a better financial future takes a lot of effort, so don’t begin until you’re sure you’re ready for all it’s going to take.

#3 – Is There A Penalty For Doing So?

 

If you want to pay off your mortgage to save yourself money on interest costs, then that will work out very well for you. It won’t work out particularly well for your bank, though – they’re going to miss out on years of expected interest payments on their loan to you.

That’s why many mortgages will have a penalty if you pay the mortgage off early. Now, paying this might still be worth it for you – you’ll just have to talk to your mortgage advisor and ensure the figures line up to make it worth your while. Most of the time it will still be cheaper to pay the fee than to continue paying interest for the entirety of your mortgage term, but make sure you have calculated this in so you don’t have any unpleasant surprises.

So, do you think you could handle it? There’s no doubt there’s plenty of benefits to paying off your mortgage early. Just ensure that you have taken the right precautions at every stage and know what you are getting into. If you do that, then a glorious mortgage-free future could be yours sooner than you ever expected.

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