29 Jun Should you pay off your mortgage early?
Mortgages are a huge part of the property market and while our staff at Glenn Flegg & Co. are familiar with the general mortgage market, we’re definitely not experts. That’s why we work closely with our friends at Nazcot Mortgages, who really are the experts when it comes to financing your next property.
For many people, paying off their mortgage is a long-term life goal, but it’s not always the best course of action. We take a look at some of the factors to consider if you are looking to pay off your mortgage early.
Making your money work for you
At the moment, interest rates are low. In fact, we are at the bottom of the cheap mortgage cycle and so borrowing money has never been so cheap. If you’re in a position to pay off your mortgage, then perhaps making inroads to investing in property.
For example, you could save £200 or make £500 net from renting a property and benefiting from capital growth. If you can borrow money at around 2% and potentially make 15% return on a buy to let, then that’s a pretty good reason to look at investing.
Current and future rates
No one has a crystal ball, and in today’s climate it is near impossible to predict which way the dial will swing in terms of interest rates. That doesn’t mean however, that we can’t make some educated forecasts based on trends in previous years.
As mentioned before, we seem to have some of the lowest rates in history available for us and so now might be the perfect time to make your money work harder for you and re-invest into property. Make sure you get in touch and a member of our team will be happy to chat through your options.
Will you be penalised for paying off early?
Many fixed-term mortgage products will have an early repayment charge (ERC); that’s why, if you find yourself in the position to overpay on your mortgage, you might be better off clearing other outstanding debts (credit cards, personal loans etc.) as those interest rates tend to be high.
Most ERCs will activate if you are trying to pay more than 10% from your mortgage while still within your fixed-term agreement. If you are outside of this agreement then you can pay as much off as you want without restriction.
Your time of life
Your age and circumstance will usually dictate what kind of mortgage products you can qualify for. If you are young enough and find yourself in a position to reinvest, you might find a better use of your cash is to invest in other assets rather than paying down existing ones. If you are older and have invested, now might be the time to cash in on those investments in order to consolidate and pay down your existing mortgages.
Before you go blowing as much cash on repaying your mortgage as possible, remember that you should always have some emergency funds. In today’s rather uncertain economic climate it’s important to have access to some emergency funds to cover your bills in case of a job loss, ill-health or something else unexpected popping up.
Get in touch
As independent mortgage advisers we offer a personal service to help you make informed decisions about your specific financial options. We have access to some of the best deals on the market so make sure that you contact one of our qualified mortgage advisers on 01753 439000 or email. You can also follow us on Facebook, Twitter and LinkedIn.