Becoming mortgage free is a financial goal for many home owners and an expert has shared their tips to get out of the debt sooner rather than later.
Jinesh Vohra, CEO of free mortgage app Sprive, spoke about five key things people can do to slash years off their mortgage term.
Overpay regular small amounts
Making regular overpayments can take months or even years off your mortgage term. Mr Vohra said one way to do this is to increase your monthly payment.
He said: “This will mean you are paying more off the loan compared to the amount you are paying in interest allowing you to clear the debt quicker.
“Putting away just a few pounds a day or week will have a huge impact on saving thousands off your mortgage.”
Sprive helps users set aside spare cash to go towards mortgage overpayments. The average user saves £8,000 in interest and reduces their mortgage term by four years.
Couples save an additional £5,500 on average and will be mortgage-free two years earlier compared to single users.
Overpay a lump sum
There is also the option to do one-off overpayments. Mr Vohra said: “Typically, lenders allow overpayments of up to 10 percent.
“A good time to make a lump-sum mortgage overpayment is before you remortgage, as you will be reducing your LTV and giving you access to better deals.”
Remortgage when your current deal ends
Mr Vohra said this is another way to reduce the amount of interest you pay over the duration of your mortgage.
He said: “When your initial deal period ends, if you don’t remortgage on time, you’ll be moved to your lender’s standard variable rate (SVR).
“The SVR is the interest rate your lender charges you once your initial deal period ends and tends to be a lot higher which means you’ll be paying a lot more than you should be.
“So, if your current mortgage deal is due to end in the next six months, or you’re already on an SVR you should start shopping around to fund a better deal. On a given day there are over 20,000 deals so it’s important to get the best deal available to you.”
Get rewards from your everday shopping
Apps like Sprive offer rewards on everyday purchases including supermarket shopping. Sprive partners with more than 60 big name brands, including ASDA, Morrisons, Tesco, Amazon and Starbucks.
Mr Vohra explained: “The rewards feature gives customers free money on their everyday shopping, which they can turn into ‘overpayments’, whether it’s from their weekly shop or their morning coffee.”
Exit your deal early if rates fall
Sometimes it works out more cost effective to quit a mortgage deal early even if you incur an early repayment charge (ERC).
Mr Vohra explained: “If your home value has increased significantly and you’re now in a lower loan-to-value band (LTV), it could justify paying an ERC.
“You can expect to get better deals if you fall below one of these typical thresholds – 90 percent, 85 percent, 80 percent, 75 percent, or 60 percent.
“One of the benefits of remortgaging with Sprive via the app is that it scans the market every day to help find users a better deal. It is also able to crunch the numbers and calculate if users are likely to be financially better off by paying the ERC.”
For the latest personal finance news, follow us on Twitter at @ExpressMoney_.
