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<\/p>\nCLEARING the mortgage is a target for many borrowers dreaming of financial freedom.<\/p>\n
However, with a few shrewd money moves, the debt-free milestone could be closer than you might imagine.<\/p>\n
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Paying off your mortgage could mean hundreds of pounds in extra cash freed each month, which can be put towards other bills or spent on luxuries such as holidays.<\/p>\n
Paying back borrowing is all the more important when interest rates are higher.<\/p>\n
The Bank of England base rate is at its highest level in 15 years, which has in turn made mortgages more costly. \u00a0<\/p>\n
Nicholas Mendes, mortgage technical manager at broker John Charcol, has helped hundreds of clients pay off their loan earlier than planned.<\/p>\n
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Here, he shares his top tips to become mortgage free faster.<\/p>\n
If you have a spare room, renting it out to a lodger can earn thousands of pounds in extra cash.<\/p>\n
If the money is used to overpay the mortgage, it will chop down the time it takes to pay off your mortgage. \u00a0<\/p>\n
Under the government\u2019s Rent a Room scheme you can earn up to \u00a37,500 a year tax-free from letting out a room in your home.<\/p>\n
<\/span><\/p>\n <\/span><\/p>\n <\/span><\/p>\n <\/span><\/p>\n Nicholas says: \u201cIf you\u2019re not ready for a full-time live-in guest, you could use AirBnB to rent out a room for a couple of nights a month.<\/p>\n \u201cEven making \u00a350 a month adds up to \u00a3600 over a year.\u201d<\/p>\n Paying off \u00a350 a month on a \u00a3200,000 mortgage at a rate of 4.5% on a 25 year term would slice almost two years off your mortgage, according to calculations by Nicholas.<\/p>\n It would also save \u00a311,520 in interest.<\/p>\n A sure fire way to becoming mortgage free faster is by upping your monthly mortgage repayments.<\/p>\n Most lenders will let you repay at least 10% more than your repayments before charging any early repayment charges.<\/p>\n Nicholas says borrowers can increase their monthly direct debit so the money is automatically taken on a regular basis \u2013 even if you only up the repayment by \u00a310 or \u00a320 you will save on interest.<\/p>\n Or you can make lump sum payments when cash is available \u2013 this could be useful for people who work on commission or get an annual bonus.<\/p>\n Nicholas says anyone still on a low fixed rate taken out before more recent rate rises should make the most of it.<\/p>\n He adds: \u201cIf you can afford to do it, overpaying when you are on a lower rate means that more of your money will go towards eroding the underlying debt.<\/p>\n \u201cWhen you come to remortgage, you will then have a smaller debt to pay interest on.\u201d<\/p>\n The earlier you repay your mortgage, the more you save in interest \u2013 these savings can then be used to further cut down the debt.<\/p>\n Nicholas says that it\u2019s also worth checking the terms of your mortgage.<\/p>\n Lenders typically allow repayments of up to 10% a year \u2013 but some will allow as much as 30% giving you more leeway if you can afford it to reduce your mortgage.<\/p>\n Overpaying your mortgage could have the added benefit of putting you on a lower loan to value (LTV) tier with your mortgage.<\/p>\n You loan to value is how much deposit or equity you have versus how you have borrowed from the lender. <\/p>\n If you put down a deposit of \u00a340,000 on a \u00a3200,000 property, you have a 20% LTV. <\/p>\n And as you build up more equity in your property, lenders reward you with lower borrowing rates.<\/p>\n A lower rate, again, gives you more space to make overpayments to chip away at the debt.<\/p>\n Nicholas says: \u201cIf you have a year or two left on your mortgage, it could be worth working out how much you\u2019d have to overpay to get to a lower loan to value.<\/p>\n \u201cBy making that overpayment and getting a better rate further down the line could save you hundreds of pounds.\u201d<\/p>\n Mortgage rates are much higher now than they were just a couple of years ago.<\/p>\n It means that it\u2019s more important than ever to get the very best rate you can.<\/p>\n Nicholas says: \u201cDon\u2019t just stay with the same lender.<\/p>\n \u201cEven a rate difference of 0.2% can have a huge difference in how much interest you will pay and how much easier it is to clear the debt earlier.\u201d<\/p>\n Some of the lowest rate mortgage deals come with costly product fees.<\/p>\n However, the cheaper rate can be worth paying for, according to Nicholas.<\/p>\n A good independent mortgage broker should be able to search the market for you and find the best deal for your circumstances.<\/p>\n A professional will also be able to work out when it\u2019s more beneficial to pay a high fee for a lower rate.<\/p>\n Remortgaging is also an opportunity to knock time off your mortgage term. For example, taking out a 20-year-term instead of a 25-year-term, Nicholas says.<\/p>\n Opting for a lower term pushes up your repayments in the first instance but it means that overall you pay less interest on the debt and pay it off sooner.<\/p>\n Nicholas adds: \u201cTry to shave off a year or two, if you can afford it.<\/p>\n \u201cAdjust your budget accordingly and you will naturally pay off your debt a lot earlier.<\/p>\n If you\u2019ve made any energy efficiency changes to your home it could be worth paying out for a new energy performance certificate (EPC) for your home.<\/p>\n Nicholas says: \u201cLenders are really mindful about making things sustainable.<\/p>\n \u201cIf you have a EPC of C or above, you could get lower rates through a green mortgage from some lenders.<\/p>\n \u201cLower interest rates potentially can then give you flexibility to make the overpayments that will see you become mortgage free sooner.\u201d<\/p>\n For example, Virgin Money currently has a competitive green five-year fixed at 5.22% with a \u00a3995 fee.<\/p>\n You can use some of your disposable income to overpay your mortgage. <\/p>\n But you should still keep some savings aside for a rainy day, says Nicholas. <\/p>\n An offset mortgage is one way of using savings to lower the interest you pay and still having cash available should you need it.<\/p>\n For example, if you have a \u00a3250,000 offset mortgage and \u00a350,000 in the savings account linked to the deal, you will only pay interest on \u00a3200,000 of the loan. <\/p>\n These products are usually best for people who have big savings, according to Nicholas. <\/p>\n If you are saving for a big event such as a wedding or perhaps a home extension, the cash could work in an offset mortgage. <\/p>\n He adds: "Offset mortgages are typically more expensive – so you'd usually need to have a large amount in savings to make them worthwhile." <\/p>\n A mortgage adviser should be able to help work out if the deal is suitable to your circumstances. <\/p>\n![](\"https:\/\/www.thesun.co.uk\/wp-content\/uploads\/2023\/09\/SC_COMP_P18-COFFEE.jpg\")
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Overpay your mortgage<\/h2>\n
Target a lower loan to value <\/h2>\n
Pick your remortgage deal carefully<\/h2>\n
Update your EPC<\/h2>\n
Offset mortgage<\/h2>\n
READ MORE SUN STORIES<\/span><\/h2>\n
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