In such uncertain economic times, it can be confusing as to whether or not you should pay off your mortgage early, provided you are able to.
Mortgage rates are currently very low, and so it could be argued that there is no huge benefit to be gained by paying off your mortgage early. That said, in an uncertain economy, you may wish to have all of your debts cleared. To make the best decision for you, you must ask yourself a number of questions…
Do you have other debts?
Perhaps you have credit card debts or bank loans with a higher rate of interest than your mortgage. In this case, it may be better to pay off these debts first, as you may incur large charges in the long term should you fail to pay them off.
Do you have a pension or savings account?
Pensions and high interest savings accounts are a good way of growing your money over a long period of time. It could make more sense to put your money into a high interest savings scheme, as opposed to paying off your mortgage early, as the interest you could earn from saving could outweigh the interest you are paying on a mortgage.
Do you have insurance?
Should disaster strike, you need something to fall back on. If you are putting all your money and savings into a mortgage, you may be neglecting things like insurance or financial buffers.
Will you be charged?
Read the details of your mortgage. Some mortgage deals will charge you for overpaying your mortgage. It is common that lenders will allow you to overpay by around 10% each year without incurring penalties.
Is your mortgage flexible or offset?
Flexible and offset mortgages allow you to overpay, then retrieve the money without charge should you need it at a later date. This could be a benefit to you, should you be unsure about committing all of your cash to your mortgage.
If you would like more information on mortgages, please get in touch. Our experienced advisers would be glad to help.