Should I Pay Off My Mortgage Early?

Many people believe that paying off your mortgage as soon as possible makes good financial sense. If you pay your mortgage off early you will reduce the total amount you pay in interest, as well as removing what is most likely your largest single monthly outgoing. So, is paying your mortgage off early the best idea? Well, the answer to that may not be as straightforward as you think.

For most of us, a mortgage is one of the biggest financial commitments we’re ever likely to make – however, in terms of interest rates, it’s not necessarily the most expensive. In this blog post we’re going to help you make an informed decision as to whether you should pay your mortgage off early, and discuss other options that you can consider.

Can you pay off your mortgage early?

The first thing to address when considering paying off your mortgage, is whether you can pay it off early without being subject to early repayment charges.

For example, if you have a fixed rate mortgage, you could be charged for making overpayments before the fixed rate ends. Depending on how soon you pay off your mortgage ahead of your mortgage maturity date, these fees are usually between 1% and 5% of the amount you overpaid. Nonetheless, it should be noted that your early repayment charges will vary depending on your mortgage deal.

On the other hand, if you have a standard variable rate mortgage you will not be subject to early repayment charges, so you will benefit from the flexibility of being able to make overpayments with the goal of paying off your mortgage early. However, there are other considerations to make when deciding whether a standard variable rate mortgage is right for you, which we will outline in the section below.

Could you remortgage to another lender, or switch mortgages instead?

If you are dissatisfied with your current mortgage deal, you may wish to consider remortgaging to take advantage of a better deal with an alternative lender, rather than paying off your mortgage early – our information on the things to consider when remortgaging will help you to understand whether this option could be right for you.

When your fixed rate deal has ended, your mortgage will revert to a standard variable rate. Standard variable rates are subject to fluctuations, which means that your monthly payments can increase at any time, so at this stage some people may be interested in switching mortgages and taking advantage of a better deal offered by their current lender. However, if you decide that you would like to pay off your mortgage early, then a standard variable rate mortgage will give you the flexibility to do so as you won’t be subject to any early repayment charges.

It’s recommended that you speak with your current mortgage lender before making any decisions regarding overpayments, or paying off your mortgage at an earlier date.

What else should I consider before paying off my mortgage early?

Once you know whether you’re able to pay off your mortgage early, and are clear about any charges for doing so, there are a number of other considerations you should make before making a final decision about paying off your mortgage early.

1. Do you have any other debts that are more expensive?

Other debts, such as credit cards or personal loans, may have much higher rates of interest than your mortgage. So, if you have an additional income or a lump sum of money, perhaps it would be more beneficial to use this to pay off your more expensive financial commitments.

2. Do you have emergency funds?                                

It’s recommended that we all have a savings account that we can easily access in the event of a financial emergency. If you do not have one in place, you could set up your emergency savings fund, instead of making overpayments towards your mortgage. Our blog post ‘How Much Should I Have in My Savings Account?’ provides more information on this topic.

If you’re hoping to pay off your mortgage early, we hope you’ve found this blog post informative. We understand how tricky it can be to make decisions about your mortgage, so our qualified mortgage advisers would be delighted to speak with you to discuss your options. Call our Mortgage team now on 0345 606 4488, or book an appointment at your local branch.

Your mortgage will be secured on your home. Your home may be repossessed if you do not keep up repayments on your mortgage.