How To Reduce Your Mortgage Quicker

When you first obtain a mortgage, it can be overwhelming to see the 25-40 years of payments laid out before you as the broker or lender explains the product. You will probably want to know How To reduce your mortgage quicker, right?

Reducing your mortgage is more crucial than ever, especially with the average mortgage term rising to 30 years in the UK.

But there’s no need to panic! Below, we’ve put together a simple guide that can help you pay off your mortgage that little bit quicker.

1. Get a mortgage

(This step is crucial)

If you need help in getting a mortgage, we’ve got another guide that can help you with that, or maybe consider reaching out to a mortgage adviser.

2. Make overpayments

Any overpayment is interest-free. Usually, you can pay up to 10% per year without additional charges. If your mortgage is £750 per month, but you can afford £800 per month, do it. The £50 will come straight off the balance.

You can use an overpayment calculator, such as the NatWest Overpayment Calculator, to determine how quickly you would reduce your mortgage if you made additional payments.

3. Reduce the balance when remortgaging

When you remortgage to a new rate, there are no early repayment charges during the period between being out of a locked rate and entering into a new one. If possible, consider making a lump sum payment before locking into the new rate.

4. Reduce the length of your mortgage

In the early years of a long-term mortgage, such as 25 years, the majority of the payment will be going towards interest.

Example of a 25-year mortgage term:

A £1,000 monthly payment may have £900 going towards interest, while £100 reduces the actual mortgage.

As the years on the mortgage decrease, this scale will shift in favor of the balance, meaning you will eventually start to pay more towards the balance than towards interest.

Example of a 5-year mortgage term:

A £1,000 monthly payment may have £800 reducing the balance, while £200 goes towards interest.

When it comes to remortgaging, try to shave a few years off the mortgage.