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Independent mortgage advice - paying off your mortgage early
Independent mortgage advice - paying off your mortgage early
Getting rid of debt fast, in particular a mortgage, is the ambition of many Brits. Especially given the rising cost of living and falling value of property.
Maidenhead,
Berkshire,
United Kingdom
(prbd.net)
18/01/2013
Getting rid of debt fast, in particular a mortgage, is the ambition of many Brits. Especially given the rising cost of living and falling value of property. People no longer want to be at the mercy of the property market which falls and rises unpredictably.
Borrowing heavily is all very well in a world of high inflation as was the case in the Seventies and Eighties, as inflation reduces the value of the debt.
However, when inflation is low debt stays as it is.
Over the last few years, inflation has risen but historically speaking it's still relatively low. However, you also need wage inflation. But this has been pretty much non-existent since the beginning of the recession and if you can't rely on large wage increases reducing your debt then paying it off as soon as you can is very wise.
Richard Alton runs Alton Mortgages, a whole of market broker based in Maidenhead. Established in 2005, customer service is at the heart of what they do, and they recognise that their clients are individuals with very unique requirements. He says:
"Paying off your mortgage early can be a very good investment or put it another way give you total financial security and you can then invest in other projects.
"A lot of people have very low interest rate mortgages, it makes total sense (if you can afford it) to overpay the mortgage as the article states even overpaying a £100,000 by £100 per month can save you a whopping 6 years of interest. The other way of looking at overpaying and again if you can afford it is to pay what you would have paid if you were on your pervious mortgage payment on your previous deal as I bet it was significantly higher this way you would know many more years off the mortgage. I massively believe this is a golden opportunity to seriously make a massive dent in your mortgage payment. The best way to look at it is to view interest rates as if they were normal - i.e. around 5%
"If you have a £100,000 mortgage and before the credit crunch your monthly payment was £800 but now you are on a low rate your mortgage payment is £500. You have 3 options. continue to pay the £500 per month and your mortgage will pay off at the end of the original period BUT if you overpay by £100 or even better by £300 per month so you are no worse off than the amount you knock off the mortgage will be immense and make a massive amount of difference to the interest you will pay back to the bank. Clearly you must be able to afford this and also the bank must allow this as well.
"Most mortgages allow a 10% overpayment facility and also if you are on a variable rate mortgage there are no restrictions. If you pay more than you are allowed they will charge a part redemption charge which you don't want to pay. It is also important to check your lender charges daily interest (most do) but there are some deals out there that charged annual interest and if they do there is no benefit in overpaying monthly but in this case make the overpayment once a year else the bank will gain a lot more than you would.
"Offset mortgages are very good products but I generally only recommended then if clients have at least 15% of their mortgage balance as savings to get any real benefit from them. You do pay extra for an offset mortgage.
"If you have other personal debts that charge a lot higher interest rate than your mortgage you should pay these off first, then the affect compounds. Once these are gone your monthly outgoings will reduce and thus when it comes to overpaying the mortgage you can pay more off as you don't have the previous debt.
"Overpaying the mortgage is a discipline, the way I do it I pretend that rates are at 5% and that I am just paying my monthly mortgage, I know it may mean less holidays today but also I know the end result is that I will be mortgage free about 10 years earlier than I would then it gives you so many more options and opportunities for holidays and retiring."
Notes to Editors
Alton Mortgages is an established whole of market mortgage broker based in Maidenhead, Berkshire. Established in 2005, customer service is at the heart of what we do, and we recognize that our clients are individuals with very unique requirements and do what we can to find low mortgage rates and the best residential mortgage deals. Click here to find why you should use a broker. We work with individuals and families to provide them with an exceptional residential mortgage service with low. Click here to find out more about Alton Mortgages.
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About
Alton Mortgages is an established whole of market mortgage broker based in Maidenhead, Berkshire. Established in 2005, customer service is at the heart of what we do, and we recognize that our clients are individuals with very unique requirements.
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