Work out the loan-to-value (LTV) of the mortgage you’ll need. If you decide to remortgage you may find you have greater access to mortgage deals than when you took out your last mortgage. This might be because your house has increased in value since you took your last mortgage out, or you’ve been paying a repayment mortgage or even both. No matter the reason, these factors will mean you own a greater proportion of your home and the loan-to-value (LTV) ratio (the size of your mortgage amount, compared to the value of your home) will be lower. The lower your LTV, the more mortgage deals may be available to you, and you may get access to better rates too.
Browse the market for a new deal. You want to make sure you’re on the best deal possible for you. In order to do that, you'll need to look around and see if you can find any better deals.
Please note: Depending on your circumstances you may need to pay fees for switching mortgages, such as an early repayment charge. But your adviser will talk you through your options and advise you on any potential savings.
If you’ve just moved home, or just remortgaged, you probably won’t need to look for a new mortgage deal. You could, however, consider making mortgage overpayments.
A mortgage overpayment is an additional payment you makeover your regular monthly mortgage payments. Overpayments can be made as a one-off lump sum, or you can overpay a regular amount each month.
This means you can save on the total amount of interest you pay and you can potentially pay off your mortgage quicker too.
You need to bear in mind, however, that most mortgages will carry an early repayment charge during the deal period. Most lenders will allow some overpayments before you incur a charge, usually up to 10%. Always make sure to check with your lender how much you can overpay before making any overpayments. Your mortgage adviser will be able to assist you with this.
Offset your savings
If you have savings and prefer not to overpay your mortgage with them, they could still help you on your journey to mortgage freedom. With offset mortgages, your savings and mortgage are linked. You use the savings to ‘offset’ or reduce the amount of interest you’re charged on your mortgage.
You have an offset mortgage with an outstanding balance of £150,000 and £50,000 in your savings account. You’ll only pay interest on the difference which, in this example, would be £100,000. This means you’ll save on the amount of interest paid, and you can use this to help pay off your mortgage sooner.
Plus, you’ll have access to your savings whenever you need them. However, bear in mind you won’t earn interest on your savings, and interest rates on these mortgages can be higher.
Get a lodger
You could give your income a serious boost if you have a room you can rent out. If you rent out a room in your home, you could take advantage of the UK Government’s Rent a Room scheme. This allows homeowners (who rent out rooms in their homes) to earn up to £7,500 per year before having to pay any tax on the income.
The limit of £7,500 is for individuals. If you share income from the property with another person, you can only claim up to £3,750 each.
To qualify to use the scheme, you must offer fully furnished accommodation in your main home. Remember to get permission from your mortgage provider before starting! You’ll also need permission from your home insurance provider too.
If you choose to do this and put all the money towards paying off your mortgage, it could make a huge difference!
Consider your priorities
When it comes to your finances, it’s important to have a plan. If your goal is to become mortgage-free as quickly as possible, you may choose to cut out all luxuries like holidays and meals out and put every spare penny into paying off your mortgage. While someone else may want to keep their holidays but forgo getting a new car.
The key is to get the right balance for you. The best thing to do is to sit down and make a budget and plan what you’re going to spend your cash on.
We’re here to help
When it comes to planning your journey to becoming mortgage-free, our award-winning team of expert advisers are here for you, whenever you need them.
If you have any questions about becoming mortgage-free or just fancy a chat to discuss your options, our team are always happy to help. You can get in touch with us here.