With interest rates at a historical low, it is well worth your time to look into paying off your mortgage early.
The benefit of this is that the interest rate in the future will take a percentage of a smaller amount since you are paying more each month, thus decreasing the overall money you are paying for your mortgage; the drawback is that lenders don’t want you to do this, and may charge a fee for paying early.
The best course of action would be to communicate with your lender about any possible penalty fees; if you have any further concerns contact a mortgage advisor (we recommend Which?).
Overpaying your monthly mortgage
You should pay off expensive debts with higher interest rates (unsecured / personal loans, credit card debt) first, before you move on to your monthly mortgage payments.
Have at least 3 - 6 months of money in reserve before reaching into your savings account to pay off mortgage early.
With interest rates at an all-time low, a lot of adjustable rate mortgage plans are low as well, since they are on track with the Bank of England base rate. Communicate with your lender about whether or not the charge a penalty fee for paying your mortgage early. If they do charge a penalty fee, then should evaluate whether or not your savings would exceed your costs if you do proceed with overpaying your mortgage.
Paying off mortgage early vs. Saving
Finding a savings account rate that would be more than your current mortgage rate is highly unlikely in this market, thus making it more promising to pay off your mortgage early, saving you possibly years off your mortgage payments.
Try this Mortgage Overpayment Calculator to see whether pay off your mortgage early makes sense.
Consider refinancing if: