Many of us are tied down to a mortgage – it’s almost impossible to be able to own a property without one. However, big monthly payments can be a huge drain on your finances and you undoubtedly long for financial freedom. Imagine owning your home outright, with no mortgage payments ever again! The sooner the better, but where do you find the extra income in order to make higher payments?
Did you know that overpaying your mortgage by just £100 per month could knock years off it? Upping your monthly payments could also save you on interest, but beware some borrowers will charge you for paying back early. Check with your individual mortgage provider how will you will save the most money and be able to get out of your mortgage as soon as possible.
Here are five ways you could use to pay off your mortgage sooner.
Pay off a large chunk
You can significantly shorten the length of your mortgage by making a one-off payment. For example, if you receive a one-off lump sum from a bonus, redundancy or inheritance then you can put this towards your mortgage all at once.
Switch to a better deal
People often talk about re-mortgaging their home but think it’s too much hassle. However, switching to a better mortgage deal could save you thousands and thousands of pounds in interest over the years, so it’s definitely worth looking into. You shop around for your energy provider and car insurance, so why not shop around for your biggest debt, your mortgage?
Find a lodger or host a student
If you’d like to start paying off more every month but don’t have the cash, then why not use your extra space to earn some income. Rent out your spare room to a lodger or an international student, and the cash you receive could go to paying off the mortgage sooner.
The Rent a Room Scheme, which applies to Host Families taking in international students or live-in landlords renting to lodgers, lets you earn up to a threshold of £7,500 per year tax–free from letting out furnished accommodation in your own home. This was recently increased from £4,250 as the government has tried to encourage more people to open up their homes. The tax exemption is automatic if you earn less than the £7,500 threshold.
Use your savings
If you have savings in a bank account that you don’t want to use now, you can still use them to save money on your mortgage. If you switch to an offset mortgage, you won’t pay interest on the amount of your savings – find out more from your bank or building society.
If you really want to get rid of your mortgage debt but don’t have the money to pay it off in the foreseeable future, then you may want to consider downsizing. You could choose to move house and buy a smaller property, where you will enjoy lower mortgage payments.
Is it time for you to own your home without having to pay the bank half of your salary every month? Explore these options.