With interest rates at a historic low, it’s worth considering early repayment of your mortgage. In the current market, you’re unlikely to find a savings account rate with a better return than your current mortgage rate. This makes it more promising to pay off your mortgage early, potentially taking years off your plan.
Try this Mortgage Overpayment Calculator to see whether paying off your mortgage early makes financial sense.
The benefit of paying off some of your mortgage is that the interest rate, which may be higher in the future, will take its percentage from a smaller amount. This will decrease the overall amount you end up paying for your mortgage. The drawback is that lenders aren’t keen for you to do this. They might charge a fee for making an early repayment.
Talk to your lender about any possible penalty fees before you make your decision. If they do charge an early repayment fee, then make sure to work out whether your savings would exceed the costs of repayment.
We’d also recommend taking into consideration your broader financial situation. Make sure to pay off expensive debts with higher interest rates, such as personal loans, or credit cards, before you make early mortgage repayments.
It’s also good practice to have at least 3-6 months of savings in reserve for everyday emergencies, such as a broken boiler or unexpected redundancy, before thinking about paying off your mortgage early.
If you have any further concerns get in touch with a mortgage advisor. They will be able to provide tailored advice for your unique financial situation.
Consider refinancing if: