Home purchase, Mortgage Payment, Property Information
A guide to paying off your mortgage early
Early Mortgage Payment
Early Mortgage PaymentOne of the best ways to save money is by paying off your mortgage early. There used to be several advantages to keeping on a mortgage even when you can afford to pay off the whole thing, but this is not the case any more.Back in the high inflation days of the seventies and eighties, borrowing heavily made a lot of sense financially, as the inflation reduced the true value of the debt. Nowadays, however, inflation is relatively low, and you can no longer rely on huge wage increases to reduce the value of your debt. Also, there used to be a tax break for people with mortgages, but this was scrapped in 2001 after years of reductions. If you have, for example, a £200,000 mortgage with an interest rate of 6%, then overpaying by £200 every month could save you nearly £55,000, and reduce the length of your mortgage by more than six years. With some lenders, there is a minimum amount that you are allowed to overpay, and if you pay in less than this, then that money will simply sit in the lender’s bank account until the end of the financial year, earning interest for them rather than you. If you pay more than the minimum, then your interest bills will be recalculated the next month. Some lenders, such as Santander, offer flexible mortgages, also known as offset mortgages, that recalculate your balance on a daily basis. So if you pay in extra every month, then you can be shot of your mortgage even quicker. Some normal mortgages have some of the benefits of flexible mortgages, although there is usually a minimum or maximum amount that you can overpay by. Santander offer lots of information on their mortgages on their website. However, there are some circumstances which make paying off your mortgage early seem like not such a good idea. With some mortgages, especially those that are on a special discounted or fixed deal, you might have to pay an early redemption penalty if you want to pay off your mortgage early. Also, if you have any particularly heavy credit card debts, then you should pay these off first. Compared to a credit card with an APR of around 15% to 20%, even the poorest value mortgages seem like a bargain. |
Most Recent Edinburgh Houses
Pylon House
picture from architect
Pylon House, West Lothian : Zone Architects
St Bernard's Row
picture from architect
St Bernard's Row house : WTArchitecture
Fox Covert Townhouses
picture from architect
Fox Covert Townhouses : Campbell and Arnott Architects
Newhaven Rd House Extension
picture from architect
Newhaven Road House : WTArchitecture
Edinburgh Property
Quartermile Conversion Flats
photo from architect
Quartermile flats : CDA
Lasswade Road
image © keith hunter
Lasswade Road Housing : lee boyd
Edinburgh Houses
Glasgow Houses
Comments for the Early Mortgage Payment page welcome:
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Early Mortgage Payment : page - adrian welch / isabelle lomholt
Edinburgh Architecture : homepage