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A mortgage typically lasts around 25–40 years, depending on how much your home deposit was and what you are willing to pay back per month. So, the longer you stretch your mortgage term, the cheaper your monthly repayments will be but the longer you will be paying back your mortgage. Making overpayments is a good way of paying your mortgage off quicker, whilst also reducing the amount of interest you will pay back.

Reduce your interest rates

By overpaying your mortgage, you are far better off in the long run as you save on your interest rates and shorten your overall loan term. The interest is added onto your mortgage loan daily, so by paying more quickly you reduce the amount of interest added.

How does it work?

Accelerating your mortgage occurs by overpaying on your monthly repayments or by performing weekly repayments rather than monthly. Before accelerating your mortgage, you need to check with your lender about the terms of your mortgage agreement and make them aware of what you are doing. This is because your lender could easily mistake your overpayments for reducing your next monthly repayment, when in fact you want to reduce your overall term.

If you are on a fixed-rate mortgage, it is harder to achieve acceleration as you are typically only able to overpay by 10%.* Sometimes it can be better to remortgage your home to escape a fixed-rate mortgage and get a variable-rate mortgage i.e on a fixed rate mortgage you are limited to overpay up to 10% with most banks/lenders, whereas on a variable rate, it can be unlimited giving you more flexibility. This allows you to overpay your mortgage without any early repayment charges. By paying more each time or by paying weekly, you reduce your outstanding mortgage quicker, resulting in a faster decrease in the amount owed on your mortgage.

What happens when I pay off my mortgage?

When you have finally paid off your mortgage sooner than you knew was possible, you will have a new sense of pride. You will now outright own your property and feel proud while noticing extra disposable cash each month.

Accelerating your mortgage can make a huge difference in your overall financial freedom throughout your life. By overpaying or making more frequent payments, it can take away a large amount of interest added to your owed amount. Speak to your lender to discover your options and see how you could gain financial freedom this summer.

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