How to pay off your mortgage early | 15 tips | Save money on your mortgage

New Year, New Goals

Gemma: So FD, have you set yourself a New Year’s resolution?

FD: Absolutely. Every year we set plans for the business, but I think everyone should also have personal financial goals. One of the most important? Paying off your mortgage early.

Why Pay Off Early?

Many people focus only on getting the lowest monthly repayment, without thinking about how to reduce their mortgage term (25–30 years on average).

After COVID in 2020, more people are looking to minimise debt and outgoings. Paying off early can save huge amounts of interest and help you achieve financial freedom sooner.

That’s why today we’re sharing 15 practical ways to pay off your mortgage early.

15 Ways to Pay Off Your Mortgage Early

1. Pay in Advance, Not in Arrears
   • Some banks let you pay your mortgage at the start of the month instead of the end.
   • This reduces the interest that accrues during the month.
   • Even small savings each month add up in the long run.
2. Avoid Capital Raising & Second Charges
   • Many people add extra borrowing to their mortgage (e.g., for a car, wedding, etc.).
   • This increases your mortgage balance and extends your repayment term.
   • Instead, use savings where possible and avoid adding unnecessary debt.
3. Cut Back on Expenditure
   • Create a realistic budget (e.g., £300 for entertainment, £200 for clothes).
   • Use banking apps that track and alert you when you near your spending limit.
   • Review your bank statements for duplicate or unnecessary subscriptions (Netflix, Now TV, Amazon Prime, etc.).
   • Even small cuts can free up money to pay extra on your mortgage.
4. Overpay Each Month
   • Most banks allow you to overpay up to 10% of your balance per year without penalty.
   • Example: If your monthly payment is £1,000, increase it to £1,200.
   • That extra £200 can cut years off your mortgage.
5. Avoid Paying Broker Fees
   • Many brokers charge fees (e.g., £500 per remortgage).
   • Over 25 years, this could cost £2,500+.
   • Instead, choose a broker who offers fee-free services.
6. Reduce the Term When Remortgaging
   • Each time you remortgage, reduce your term by at least one year.
   • Example: From 30 years → 29 years → 28 years, etc.
   • Over time, this can cut up to 10 years off your mortgage.
7. Pay Fees Upfront
   • Many mortgage products charge fees (e.g., £999).
   • Adding fees to your loan means paying interest on them for years.
   • Always pay upfront if you can.
8. Use an Offset Account
   • Connect savings to your mortgage through an offset account.
   • Example: £200k mortgage with £50k in savings → you only pay interest on £150k.
   • Works best if you have significant savings (but can also help with smaller amounts).
9. Use Bonuses Wisely
   • Treat bonuses as “unexpected money” and pay them straight into your mortgage.
   • Example: £2,000 bonus per year over 25 years = £50,000 off your mortgage.
10. Align Repayments With Your Income
    • Got a pay rise? Increase your monthly mortgage payment by the same percentage.
    • Example: 5% pay rise → increase your mortgage payment by 5%.
    • Keeps you living within your means while reducing debt faster.
11. Don’t Reduce Payments if Rates Fall
    • If your interest rate drops and your payment decreases, keep paying the old amount.
    • The extra will go straight to your balance, reducing your term.
12. Use Mortgage Tracking Tools
    • Mortgage tracking tools (available through brokers) monitor whether you’re always on the best deal.
    • They can even tell you if it’s worth paying a penalty to switch.
13. Request Annual Reviews With Your Broker
    • A yearly review helps you:
    • Check you’re on the best deal
    • Adjust for life changes (kids, moving, income changes)
    • Plan your future mortgage strategy
14. Move Funds From Cheaper to More Expensive Mortgages
    • If you own multiple properties, compare rates.
    • Example: One mortgage at 1.5% and another at 2.5%.
    • Pay more toward the higher-rate mortgage to save interest overall.
15. Avoid Interest-Only Mortgages
    • Interest-only may reduce monthly payments, but you’re not reducing the capital.
    • This can leave you short at retirement, forcing you to sell your property.
    • Better to choose repayment or part-repayment options.

Important Reminders

These tips may not apply to everyone. Always seek professional advice before making decisions.

If you don’t have a broker, WIS is always happy to help (contact details below).

Warning: A mortgage is secured against your home. Your home may be repossessed if you do not keep up with repayments.

Final Words

Thank you FD for these great recommendations.

We’ll be back next week with another episode of “Let’s Talk Money & Mortgages.”

Stay safe, have a great day, and see you soon!