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Contact Your Local Branch

BELFAST, CITY CENTRE: 028 9013 7392
BELFAST, EAST OFFICE: 028 9560 9410
BELFAST, ORMEAU ROAD: 028 9521 9349
BELFAST, LISBURN ROAD: 028 9521 9351
DROMORE: 028 9210 6060
LISBURN: 028 9279 4300
GLENGORMLEY: 028 9072 7636
ARMAGH: 028 3743 0770
LURGAN: 028 3898 4004
DUNGANNON: 028 8747 0270
COALISLAND: 075 6180 7334
COOKSTOWN: 028 8673 1055

How to Become Mortgage Free

by | Jun 14, 2023 | Uncategorized | 0 comments

Achieving a mortgage-free lifestyle is an attainable goal that doesn’t have to exist only in dreams. By adopting a proactive mindset and implementing a well-structured strategy, it is possible to completely eliminate your mortgage and free yourself from the ongoing financial obligations of monthly repayments. Our mortgage advisors in Belfast have outlined this guide on how to accomplish this.

Benefits of being mortgage free

Experiencing increased disposable income and the absence of interest payments are among the notable advantages of achieving a mortgage-free status. Once your mortgage is fully paid off, you will have significantly more funds available for savings, personal expenses, and unforeseen circumstances.

Furthermore, the peace of mind that comes from owning your home outright, with the freedom to keep, sell, or pass it on to your family without any remaining debt, is an invaluable aspect of being mortgage free.

Mortgages entail substantial costs, and by paying off your mortgage ahead of schedule, you have the potential to save tens of thousands of pounds in interest. In fact, the amount you can save on interest is likely to exceed the relatively low returns currently offered by savings accounts.

Numerous financial experts suggest, with some caveats, that paying off a mortgage is a more favourable long-term financial decision than depositing excess income into savings.

However, there are certain factors to consider on the path to living mortgage free. It is important to be cautious of early repayment fees and prioritise paying off other higher-interest debts before focusing on your mortgage. Additionally, it is prudent to ensure you have sufficient savings or liquid assets to cover your expenses and emergencies since the funds invested in your property are not easily accessible until it is sold.

A cost-effective approach to achieving mortgage freedom

Plan ahead

While increasing your mortgage payments can certainly contribute to a faster repayment, it may not expedite the process as much as desired. Many individuals are unaware of the specific timeline for their final mortgage payment within the existing term.

To begin, it is essential to determine the remaining duration of your mortgage and set a personal goal for the desired payoff time frame. By assessing your monthly expenses, you can establish a budget and identify the additional amount you can comfortably allocate towards your mortgage repayment.

Our dedicated team of mortgage advisors in Belfast is here to assist you throughout this process. We understand the significance of achieving mortgage freedom and are committed to providing expert guidance tailored to your specific needs.

Overpay on your mortgage

There are multiple ways to make overpayments on your mortgage, such as increasing your monthly payments or making lump sum payments. Nevertheless, it is crucial to be aware of potential additional fees imposed by lenders to discourage rapid repayment.

Typically, lenders allow overpayments of up to 10% annually without incurring fees. To ensure you stay within this limit, it is advisable to carefully review your mortgage terms and perform the necessary calculations. By doing so, you can avoid surpassing the maximum allowable overpayment and encountering any unwanted charges.

Commit to a shorter mortgage term

When contemplating a remortgage, it is worth inquiring whether certain lenders offer the option of a shorter mortgage term. However, it is important to note that opting for a shorter term will result in higher monthly payments.

It is important to consider that once you commit to the new term, you will be bound by its duration. If you value flexibility and a safety net, overpaying on your mortgage might be a more suitable approach, as you can cease overpayments whenever necessary.

Re-mortgage regularly

By incorporating regular re-mortgaging into your financial strategy and diligently exploring various options, you can ensure that you secure the most favourable deal with the lowest interest rate available. Opting for a lower interest rate plays a crucial role in expediting the process of debt clearance.

When you successfully secure a mortgage with a lower interest rate, you can benefit from reduced monthly payments and allocate more funds towards the principal amount. This, in turn, accelerates the rate at which you pay off your mortgage, helping you achieve debt-free status sooner than anticipated.

Regularly reviewing and comparing mortgage offers from different lenders empowers you to identify opportunities for refinancing that align with your financial goals. By keeping a watchful eye on the mortgage market and being proactive in your approach, you can take advantage of favourable interest rate fluctuations and make informed decisions when it comes to remortgaging.

Try to improve your loan-to-value ratio

Securing a low interest rate is not always a straightforward task that can be accomplished solely by searching for the best deal in the market.

One influential factor in accessing favourable interest rates is maintaining a low loan-to-value ratio (LTV), which compares the amount borrowed to the value of the property.

There are several ways to reduce your LTV:

  • Consider making a larger deposit when purchasing your home, if feasible.
  • Make overpayments on your mortgage, thereby reducing the outstanding loan amount.
  • Benefit from potential increases in the value of your property, although this is largely beyond your control. Opting to buy in up-and-coming areas or making home improvements can potentially contribute to such value appreciation.

If you have already obtained your mortgage, your best opportunity to decrease your LTV is through overpayment. Many lenders have specific LTV thresholds that determine the available deals. As you approach these thresholds, consider making additional payments to bring your LTV below the threshold before considering a re-mortgage.

Pay off your credit cards and other loans

A crucial initial step in your journey towards mortgage freedom is to focus on eliminating other outstanding debts. Typically, credit cards and short-term loans carry higher interest rates compared to mortgages. Clearing these debts first is a prudent approach to prevent interest from accumulating.

By paying off other debts, you will free up additional funds that can be allocated towards overpaying on your mortgage, thereby accelerating the repayment process.

However, it is important to note that the decision is not always straightforward. Certain factors may come into play. For example, you may have a credit card that does not accrue interest or student debt with high interest rates. In some cases, it may be more cost-effective to prioritise paying off the student debt before it is automatically cleared after 30 years, rather than focusing solely on clearing your mortgage debt.

Each individual’s financial situation is unique, and it is recommended to assess your specific circumstances, consider the interest rates and terms of your debts, and consult with financial experts or advisors to determine the most effective strategy for debt repayment.

Next steps after achieving mortgage freedom

The relief of being mortgage-free can bring a sense of bliss and newfound financial freedom. If you have made sacrifices along the way to accomplish this milestone, it’s natural to want to reward yourself. However, there are various avenues to consider for utilising the extra funds beyond personal indulgence.

One option is to channel the additional money towards additional pension contributions, bolstering your retirement savings and ensuring a more secure financial future. Another possibility is to explore investment opportunities that align with your risk tolerance and long-term financial goals.

Additionally, you may consider extending support to your children by assisting them in stepping onto the property ladder.

To navigate the path towards mortgage freedom and plan for the future, it is highly beneficial to consult with our experienced mortgage advisors in Belfast.

Our mortgage advisors in Belfast can provide personalised advice on the most effective strategies to achieve mortgage freedom and guide you on the best practices to optimise your financial situation thereafter.

Helmut Elstner

Managing Director – Independent Mortgage Broker and Insurance Advisor

Helmut started working in financial services in early 2012 and founded The Mortgage Clinic in Belfast in early 2015. He specialises in all types of mortgages from First Time Buyer, Co-ownership, Self Build, Home Movers, Remortgages, Debt consolidation, to Buy to Let.

Three Best Rated Winner 2021
Winner Mortgage Broker of the year 2020
Top Rated Advisor 2021 on Vouchedfor