Pay Off Your Mortgage Early | 2022 | I Wish I’d Known This Earlier..

Welcome back to the WIS channel and podcast! My name is Gemma, and here we talk about money, mortgages, and positive money mindset.

Today’s episode focuses on strategies to pay off your mortgage early in 2022. Joining us is Ifthi, a trained accountant and mortgage advisor with over 10 years of experience and one of the founding directors at WIS.

1. How Can I Get the Best Deals from My Mortgage?

Gemma: What does “getting the best deals” mean?

Ifthi:

Always aim for the overall best deal, not just the lowest rate.

Example: A 1.1% rate might not be better than a 1.2% rate if the 1.2% deal has lower or zero product fees.

Reducing your overall mortgage costs gives you more ability to pay off your mortgage faster.

2. What Are Offset Accounts and How Can They Help?

Gemma: Can you explain offset facilities?

Ifthi:

An offset account links a mortgage to a savings account.

Money in the savings account reduces the mortgage balance on which interest is calculated.

Example: £100,000 mortgage with £50,000 in savings → interest is paid on only £50,000.

Helps reduce interest and settle your mortgage faster.

3. Should I Lower My Mortgage Term?

Ifthi:

Many people stretch mortgage terms to 30–35 years, but this delays paying off the mortgage.

Paying off early saves interest and ensures you’re debt-free before retirement.

If you can comfortably pay your current amount, avoid extending the term unnecessarily.

4. Can I Reduce My Term as My Income Rises?

Ifthi:

As your income increases, consider reducing your mortgage term.

Example: Every pay rise could allow you to shorten the term by one year.

Over time, this can significantly reduce your interest payments and shorten your mortgage.

5. How Can I Cut Unnecessary Costs?

Ifthi:

Review subscriptions (Netflix, Hulu, etc.) and eliminate unused services.

Track expenses using budgeting apps to monitor spending on transport, food, and entertainment.

Savings can be redirected towards your mortgage.

6. Should I Overpay My Mortgage?

Ifthi:

Most banks allow 10% annual overpayment without penalty.

Extra payments reduce the term and interest on your mortgage.

Example: 10% of a £100,000 mortgage = £10,000 applied to the loan balance.

7. Are Short-Term Deals Better?

Ifthi:

Short-term deals often have lower interest rates.

Extra money saved can be used to reduce the mortgage term.

Over time, your loan-to-value ratio improves, qualifying you for better products.

8. Should I Pay My Mortgage in Advance?

Ifthi:

Paying at the beginning of the month reduces accrued interest.

Even small savings add up over time, helping to pay off your mortgage faster.

9. Should I Avoid Raising Capital or Further Advances?

Ifthi:

Avoid borrowing more against your mortgage unless necessary.

Extra borrowing can increase your mortgage and interest, making early repayment harder.

10. Should I Stop Paying Broker Fees?

Ifthi:

Some brokers charge fees unnecessarily.

Money saved from broker fees can be applied directly to your mortgage.

11. How Can I Use Bonuses Wisely?

Ifthi:

Use bonuses or unexpected income to pay off your mortgage, reducing the term.

Example: Apply spare money towards your 10% annual overpayment allowance.

12. Should I Add Product Fees to My Loan?

Ifthi:

Avoid adding fees to your mortgage; paying interest on fees increases overall costs.

Pay fees upfront if possible to settle the mortgage faster.

13. Should I Adjust Payments With My Income?

Ifthi:

As your income rises, increase mortgage payments rather than lifestyle expenses.

Even a small proportion of income increase can significantly reduce your mortgage term.

14. Should I Reduce My Monthly Payments After My Rate Drops?

Ifthi:

Don’t lower payments when rates improve.

Continue paying the same amount to shorten the mortgage term.

15. Can Mortgage Tracking Tools Help?

Ifthi:

Tools track your mortgage and identify better deals in the market.

Helps avoid paying higher interest than necessary.

16. Should I Push for an Annual Review?

Ifthi:

Review your mortgage annually with a broker.

Plan overpayments or adjustments in advance rather than rushing three months before renewal.

17. Can I Borrow from a Cheaper Mortgage to Pay Off an Expensive One?

Ifthi:

For multiple mortgages, you may transfer funds to reduce higher interest payments.

Requires careful planning to balance interest rates and costs.

18. Should I Avoid Interest-Only Mortgages?

Ifthi:

Avoid interest-only mortgages for residential properties.

You must repay the principal at the end, which can be difficult, especially in retirement.

Key Takeaways

Regularly review your mortgage and expenses.

Make use of overpayments, bonuses, and offset accounts.

Avoid unnecessary borrowing, fees, and lifestyle increases.

Consult a professional advisor to maximize repayment strategies.

Gemma:

These tips may not be suitable for everyone.

Reminder: A mortgage is secured against your home; failure to repay may lead to repossession.