Mortgage free: Two steps could help Britons pay off debt for good – ‘a real difference!’

Mortgages: Expert advises public amidst rising base rates

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

Mortgage free is a goal to which many people aspire – however, it can often feel like an uphill battle to climb over a number of decades. All is not lost, though, for individuals who are determined to get rid of this debt, and there are two key ways to do so. Katie Brain, Insight Analyst at Defaqto spoke to Express.co.uk in an exclusive interview, where she discussed the ways Britons can become mortgage free, and its potential benefits.

Firstly, she highlighted it is important to consider whether a person should be paying off their mortgage at this moment in time.

She said: “It is a time now where people are getting back to work, and trying to get back to normal, but they could still be in the good habits of saving a little bit every month.

“We always say to have three to six months in funds for a rainy day, but after this, you need to take other steps and not just sit back.

“You should firstly deal with any unsecured debt you may have, as interest rates on mortgages are so low at the moment, that it’s more likely the interest rate on a credit card or car loan, for example, is higher.

“If you still have spare cash, then you should consider paying off your mortgage to get closer to that mortgage free goal, which can often be quite lofty.”

The benefits of paying off one’s mortgage are undeniable, Ms Brain added.

This is particularly the case for those who are extra keen to be rid of the burden of payments – which can often take up the majority of a person’s outgoings.

One way to do so is to overpay on one’s mortgage, and Ms Brain said: “In my mind, if you do have any extra cash, it is worth it to overpay on your mortgage, especially if you’re close to becoming mortgage free.

DON’T MISS
Cold Weather Payment scheme has started – how to check your sum [UPDATE]
Hackers could make you an unwitting victim – how to protect your money [EXCLUSIVE]
Top easy access savings accounts unpacked – Britons urged to act [INSIGHT]

“If you’ve got the cash to spare, even if it’s £50 per month, you can put it towards your mortgage and it can really make a difference.

“Everyone wants to be mortgage free, debt free and retire without a mortgage – it’s a big burden lifted.

“If you’ve got the cash, maybe it could be the right time to make it work for you.”

However, overpaying is not the only way to achieve a mortgage free status, and for some an alternative action may be more appropriate for their circumstances.

Ms Brain continued: “At the moment it’s a good time to remortgage – and another thing to do to get closer to mortgage free status is to remortgage but reduce your term.

“Say you’re on a 25 year mortgage, you could reduce it by a year or two and save yourself a huge amount of interest.

“Yes, you may end up paying more, but you may not as you could go onto a lower rate.

“Reducing the term means you can end up paying off the mortgage quicker and reaching that debt free position.

“This is especially the case for a first time buyer, when individuals first move in, there is so much to pay for, and of course, you have to get used to paying the mortgage.

“But once you’re a year or two into it, that may well be the time to look at the term and reduce it slightly.”

What is happening where you live? Find out by adding your postcode or visit InYourArea

However, with interest rates low at the moment, and the Bank of England keeping its base rate at 0.1 percent, paying off a mortgage might not always be the best use of cash.

Instead, Ms Brain stated, other options could be better for financial stability.

She concluded: “There is the argument you could potentially use the money for something else, such as an investment if this is right for you.

“But obviously, something like that isn’t guaranteed, and you have to be particularly brave, as well as realising this is a long-term decision.

“It really depends on your stance. Some people will be more adventurous when it comes to their money and therefore investment might be the best choice.

“However, certain individuals are more cautious, especially if approaching retirement, and so they might choose to overpay instead.

“It’s a personal decision at the end of the day, and you should think very carefully about what you want to do.”

Source: Read Full Article