Our content manager Christina Collison talks about her goal to clear her mortgage sooner rather than later.

It’s been almost six months since I went from renting to owning the house I have lived in for over four years. I’ve been thinking about how fortunate I am to become a homeowner again, but I have also been contemplating my long-term future as a person with a mortgage. I like to plan ahead, setting and hopefully achieving goals, and one of my aims as a new homeowner at the ripe old age of 53 is to clear my mortgage as soon as possible.

I’m slightly envious of a friend who paid hers off at the relatively young age of 51. (It seems that her life has involved less drama and fewer house moves than mine!). Now, she’s about to turn 60 and is in a strong position to contemplate retiring early and spending more time pursuing her passion for water sports and motorbikes. Not a bad way to live in your sixties!

Plan of action

So how did she do it? I asked her and she told me she had a clear plan of action. ‘I paid it off using the snowball effect,’ she told me. ‘If your payment is, say, £400 per month, pay £450. That means you’ve overpaid by £50 so the actual payment goes down over time because you are eating into the capital you need to pay it off. The payment required goes down, but you keep paying the same payment. It’s surprising how it eats into the capital over time. Check the terms of your mortgage, as there can be penalties for overpaying too much each year.’

My friend has a point about overpayments, and it’s definitely sensible to check the terms of your mortgage loan with your lender just to be sure you won’t incur any penalties. According to the website Moneysavingexpert, fees for paying too much if the terms don’t permit it can be between one and five percent of the amount overpaid.

Overpay on your mortgage

However, most lenders will allow you to overpay by 10 per cent of your mortgage balance each year. Our founder, Monica Bradley, advises her clients to make overpayments on their mortgage if they can and encourages them to take a long-term attitude towards borrowing. Even overpaying by a small amount each month – such as £50 – will add up over time and save you money in the long run. If we cut back on going out or takeaways, many of us could afford to put that amount aside each month to clear more of our mortgage. If you have the choice, and the terms of your mortgage make it worthwhile, then overpay if you can. Look at where you can cut back without noticing it too much… and be honest, are you really using that gym membership?!

If you find yourself in the fortunate position of having some spare cash each month, you might also want to look into decreasing the term of your mortgage. As with making overpayments, you will pay less interest and your mortgage will be cleared sooner, though of course, the monthly payments will be more. (Do a budget and be sure you can afford it first).

Of course, another option is to look into remortgaging to see if you could get a lower interest rate and save money. Rates are still competitive and there may be better deals out there since you took out your existing mortgage loan. Remortgaging simply means moving your mortgage to a new deal, either with your current lender or a new one, to save money. Even with an early repayment penalty, it may still be worth switching. Speak to a reputable mortgage broker to find out more about remortgaging.

Careful with money

On a general money-saving note, my friend also disclosed that she’s always been sensible with money. This may come as no surprise as she’s clearly got her head screwed on. She’s certainly not one for the latest gadgets. ‘I don’t feel the need to keep up with the Jones’,’ she told me. ‘I don’t really care what other people think on that score and I think it’s down to understanding that you can’t buy happiness. I’m more concerned with practical matters such as whether my car or bike will be a good purchase or not.’

My friend doesn’t order takeaways and batch cooks to save money. She also ensures she lives within her means and keeps track of her spending. It amazes me how much these small savings can add up. If you order a takeaway once a week at a cost of £30, that’s £1560 per year that you could have saved or halved by ordering them just fortnightly. If you cut back on going out for dinner, switching from once a week to twice a month, and assuming you spend around £50 each time you eat out, you could save £1200 per year!

So, small changes will add up over time and make a big difference in the long term. Being aware of this could help you clear your mortgage faster. I’m certainly going to cut back on the takeaways that are reducing my bank balance and expanding my waistline! To clear my mortgage earlier would be great… and to have a slimmer body when I get there would be a bonus!

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