Paying off your mortgage can take decades for most people. However, you can shorten that timeline considerably if you make a few smart moves.
Make Biweekly Payments Instead of Monthly Payments
Switching to biweekly payments is one of the simplest yet effective strategies you can employ here. Here’s how it works:
- Make half of your mortgage payment every two weeks instead of one full payment monthly.
- Since there are 52 weeks in a year, this results in 26 half payments – or 13 full payments over the year.
- That’s one extra payment than you would make with traditional monthly plans. That payment goes straight to your principal, which reduces the balance faster.
Make sure you’ve checked this strategy with your lender first, as some require specific setups for this sort of payment schedule.
Make Extra Payments Whenever Possible
Paying slightly more than you need to each month adds up over time. There are a few ways you can approach this:
Round Up Your Payments
If your mortgage payments are £1,343 per month, for instance, pay £1,400 instead. That £57 goes straight to your principal balance, which shortens your mortgage by months or even years.
Commit Your Bonuses or Tax Refunds
Put any unexpected income toward your mortgage – this could include the following:
- Bonuses.
- Tax refunds
- Cash gifts.
Lump-sum payments like these have a major impact on the overall balance, meaning you’ll reach the finish line faster.
Monthly Overpayment
Even an extra £50 monthly makes a huge difference, especially if you’ve recently cut some expenses and can commit those savings to your mortgage.
Ensure your lender knows you want the money to go toward your principal rather than next month’s payment. It might just be credited as a future payment if you don’t, which doesn’t have the same impact.
Refinance to a Shorter Loan Term
If interest rates drop/your financial situation improves, it can help to refinance your mortgage into a shorter term. Switching from a 30-year to a 15-year loan would be a good example of this. Shorter loan terms mostly have lower interest rates, so this could save you thousands over the loan’s life.
It does mean higher monthly payments, though, so check your budget to confirm you can handle that increase. It helps if you use a mortgage calculator to compare different terms and rates. Either that or consulting a mortgage advisor.
Make One Extra Payment Per Year
You could do this at any point during the year, but you’re best off scheduling it around the time you have extra income. This could be after receiving a tax refund or a holiday bonus, for example.
This single extra payment each year could save you thousands in interest and reduce your loan’s length by several years. Divide one month’s payment by 12 and add it to each monthly payment. This way, you’ve essentially made an extra monthly payment but without it feeling like much financial strain.
Avoid “Skipping” Payments if You Refinance
Lenders might give you the option to skip a payment during the transition phase when you’re refinancing. This can seem tempting, but you’re always best off making payments as usual since it will add to your interest costs over time. This also just delays the impact of your refinancing efforts.
If you have the funds, make an extra payment toward the principal instead as it’ll ensure you stay ahead of your payment schedule.
Apply Windfalls to Your Mortgage
Any unexpected windfalls you can put aside can make a major impact on your mortgage balance. This could include the following:
- Bonuses.
- Inheritances.
- Stock dividends.
- Cashback from rewards cards.
Instead of spending this extra cash on short-term items, put it directly toward your principal. Lump-sum payments like these are powerful because they go directly to reducing the principle, which shrinks the amount of interest you’ll pay over the life of the loan. Even smaller windfalls like tax returns can add up.
Be Cautious with Large Purchases
You’ve got to make smarter choices with your income if you want to prioritise your mortgage payoff. This means avoiding making large purchases on credit or taking on new debt since it means you’ll not be able to pay down your mortgage as quickly. Any large amount of debt you’re financially responsible for will pull funds away from your mortgage prepayments.
Budgeting is the best way you can avoid impulse purchases or lifestyle inflation, and it’ll be far easier to keep putting extra funds toward your home loan once you get into this habit. It also means years off your mortgage term.
Reevaluate Your Mortgage’s Interest Rate
The interest rate on your mortgage has a major impact on how quickly you’re able to pay it off. It’s definitely worth looking into refinancing options if interest rates were high when you first took your mortgage out. This is especially true if rates have dropped since it’ll save you thousands over the loan term. It also means it’ll be easier to afford extra payments.
Rates vary widely between lenders, so take some time to shop around. If refinancing makes sense, it could be a solid way of paying off your mortgage faster without needing to make many changes to your monthly budget.
Budget for Long-Term Goals and Track Your Progress
You’ll need discipline and a realistic budget if you plan on paying your mortgage off faster. Make sure your budget accounts for mortgage payments as well as any other financial goals – from saving for retirement to your children’s education. Find a balance that lets you put more toward your mortgage while simultaneously staying on track with other priorities.
It can help if you have some mini-goals or milestones along the way to keep you motivated here. You could set a date when you aim to reduce your balance by a specific percentage, for example. This is how you make the payoff process feel achievable since you’re far more motivated when you compare progress month by month.
Set Up an Automatic Payment Plan
Automatic payment plans for any extra payments can make mortgage payoff feel almost effortless. Having a system like this in place also means you’re more likely to stick to your plan. Start by determining an extra amount you can consistently afford – whether it’s £50 or £500 and set it up as an automatic monthly transfer to your mortgage account.
This steady contribution goes directly toward your principal, meaning you’ll pay your mortgage off faster and reduce the total interest over time.
The flexibility helps, too – if your financial situation changes, you can always adjust the amount that you’re contributing so you can keep things manageable.
Benefits of Automating Extra Payments:
- Keeps you disciplined without needing to remember monthly contributions.
- Reduces interest and shortens your loan term over time.
- Provides flexibility to adjust if your budget changes at any point.
Final Thoughts
Paying off your mortgage quickly can make all the difference when it comes to financial stability. It all starts with finding the right broker, though, so utilise Upscore’s Finance Passport to connect with an expert broker who will give you the best possible terms. Get started today and explore your options!
