MORTGAGE free is a status to which many people aspire, and they may now be presented with the perfect opportunity for Britons to pay off their debts and release themselves from the financial burden, according to research.
A mortgage is one of the biggest financial responsibilities a person will take on in their lifetime, but interest can quickly snowball on the payments. As a result, many will be looking to pay off the debt as quickly as possible not only to avoid paying over the odds, but also to liberate themselves from the debt and redirect their funds elsewhere. With many people borrowing thousands or even hundreds of thousands of pounds, however, the task can sometimes appear to be insurmountable.
However, according to research undertaken by Halifax, the last year and a half may present a unique set of circumstances which Britons could capitalise on to become mortgage free.
Lockdown, it is suggested, could unlock Britons from their mortgage, as a boost in the UK’s savings could cut down thousands in interest and months off a term of a mortgage.
UK savings increased by £200billion during lockdown, the lender states, as there was reduced expenditure on travel and leisure, leaving Britons with more in their back pocket
This makes the average monthly saving approximately £450 per person, and the median, a more realistic measure, at £180 according to the Office for National Statistics.
As a result, Halifax has urged individuals to take a “once in a lifetime opportunity” to redirect their cash towards mortgage overpayments.
Most mortgage arrangements will allow a certain amount of overpayments either regularly or on an ad-hoc basis – this usually stands at around 10 percent.
However, it is estimated that fewer than half of people actually take advantage of the feature which could help them accelerate towards mortgage free status at a far quicker pace.
Paying £90 extra – 50 percent of median monthly savings – towards a £200,000 mortgage, from the first payment onwards, would reduce the loan’s total cost by more than £16,800 and the term by over three years.
Overpayments are not an action which have to be taken from the outset, and can still be beneficial long into the term.
Paying an extra £90 extra each month from the mortgage’s 10th anniversary could still save £5,300 in interest and cut. “Brinkwire Summary News”.