In this brief blog, we are going to talk about being mortgage free and what it means to become mortgage free in the United Kingdom.
A mortgage free life
A lot of us want to be mortgage free. I mean, the average mortgage costs over £45,000 in interest over twenty-five years. The average mortgage debt in the UK is £123,000, according to the Council of Mortgage Lenders. With an average interest rate of 2.63%, that means the average homeowner paid £3,154 interest on their mortgage last year.
As we look upon our mortgage debt with contempt and anger, we plot our mortgage freedom and aspire for the day when mortgage repayments will truly be a thing of the past.
Being mortgage free will mean you cut out your expenses, look to increase your income and spend every extra penny you have on overpaying your mortgage.
This means you will not go on any holidays for a long time, you will not go out for dinners, have a gym membership or pay any costs which you can do without. You may want to start shopping with voucher codes, looking for cashback deals and looking to refinance any current debt including your mortgage to a much cheaper rate before you start looking to pay it off. You may want to think about family planning and when you may want to have children in order to manage your household costs whilst you pay off your mortgage. If you have a car you may want to get rid of it and find cheaper modes of travel.
If you plan to become mortgage free you should know that it can take quite a long time. You should be mentally prepared to save a lot of money for a prolonged period of time.
What does mortgage free mean?
To be mortgage free means to get to a point when we have paid all of our mortgage and we have no more monthly mortgage repayments to make. At this point, we are now mortgage free and own the property outright. The mortgage deed should now be handed over to us.
mortgage free. A person or number of people who had a mortgage and have paid all mortgage payments in full and now own their property or home and own the legal deeds to the property.
Is it worth paying off my mortgage?
It can be worth paying off your mortgage if you have a preference to clear your mortgage debt as soon as possible. It may be worth paying off your mortgage if you have enough disposable income which you can use to pay off your mortgage early and become mortgage free.
On the other hand, paying off your mortgage may not be worth it if you have a lot of debts which are costing you more per year, you don’t have enough disposable income and if interest rates on mortgages are cheaper than they will usually be or maybe you are on a long term fixed rate that is much lower than the current standard variable rate mortgage.
How can I pay off my mortgage in 10 years?
If you want to pay off your mortgage in 10 years then you should know that this may be possible. You should first work out if you have any mortgage overpayment fees on your mortgage, you should then work out how much you will need to overpay per month to pay off your mortgage in 10 years and be mortgage free.
Is paying off a mortgage early a good idea?
Paying off your mortgage may be a good idea if you want to become mortgage free and you think you can afford to make your mortgage repayments and any extra overpayments you may need to make in order for you to be able to pay off your mortgage early. u003cbru003eu003cbru003e Most mortgage lenders now include mortgage overpayment charges on their mortgage and this means that it is very hard for borrowers to pay off their mortgage early without it costing them.
Are there any disadvantages to paying off your mortgage?
Yes, there are some disadvantages to paying off your mortgage early. If you have extra income and the current mortgage rates are lower than the saving rates then you are better off putting your money in a savings account than paying off your mortgage if the interest generated over a similar time frame will be more than the interest saved on the mortgage. u003cbru003eu003cbru003e On the other hand, if the interest on your mortgage over a similar time frame is bigger than the interest you would have earned if you saved then paying off your mortgaging may be the better choice.
Is it better to pay down mortgage or invest?
A common question people ask is if it’s better to pay down their mortgage or invest. This has to do with the opportunity cost. If the returns from investment are better and guaranteed then you should invest rather than pay off your mortgage. u003cbru003eu003cbru003eIf the returns generated from investing are less certain and smaller than the cost of your mortgage interest then paying off your mortgage rather than investing may be the better choice.
Should I overpay mortgage?
You should pay off your mortgage if you want to be mortgage free. You should pay off your mortgage if you have enough disposable income to pay off your mortgage. You should pay off your mortgage if the mortgage lenders don’t charge high early repayment fees or mortgage overpayment charges. You should pay off your mortgage if the interest on your mortgage is more than the interest on the best saving accounts and the interest on potential investments.
How to become mortgage free?
Lower your interest rate by remortgaging regularly
Overpay on your mortgage to save on interest charges
Offset your mortgage with your savings to reduce interest charges and monthly repayments.
Using a mortgage broker to become mortgage free
You may want to consider using an independent mortgage broker to get a mortgage which may help you eventually become mortgage free by constantly remortgaging to the best rates..
Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases. This could be over 11,000 mortgage products. This may have some advantages than going directly to a mortgage lender.
A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you.
After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your remortgage is indeed a possibility before you make a full mortgage application. Once you have found a home you want to buy or are satisfied with the mortgage offer for your remortgage then the mortgage broker will then look to get you a mortgage offer.
This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month if there are any limits such as early repayment fees, or annual overpayment limits.
If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer. Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it, they will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.
In this brief guide, we discussed what it means to be mortgage free. If you have any questions or comments please let us know below.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.