Home Property Is it Worth Paying a Mortgage off Early?

Is it Worth Paying a Mortgage off Early?

by James McGregor

If you are paying for your home with a mortgage, then you may think that it will be really good to be able to repay your mortgage early. This is a dream that many people have and it might be one that you have as well. However, it is something that you should think hard about as there are pros and cons to repaying it early and you need to make sure that it is the right decision for you.

Save lots of interest

The main reason that people want to repay their mortgage early is because they will save so much money in interest. With a mortgage you will be paying interest on the amount of money that you owe. As you reduce the amount that you owe, you will have less money to pay interest on. This means that the quicker you can repay that sum of money the less you will pay in interest. Some people therefore try to overpay as much as possible on their mortgage so that they can keep reducing the interest that they are paying until they pay it off. When interest rates are relatively low, like they are at the moment, interest is low too. This should mean that people have more money to pay off more of their mortgage. As interest rates rise, people have to pay more for that and will have less money to repay the mortgage.


It is worth being aware that there are often fees for repaying your mortgage early. Some lenders will not even allow it at all. Therefore, you will need to make sure that you are going to be able to do this and then check how much it will cost. With some lenders the fees are extremely high but this does vary and so you will need to check. You may even want to change lenders so that you can have the option of overpaying or early repayment. The fee you want to look out for is the ‘early redemption fee’ which can vary from just a nominal amount to cover the admin costs to a very large amount of money. You will need to calculate whether that fee is so high that it will not be worth repaying early or whether you are happy to pay it considering how much you will save in the long term on interest payments.

Own the property

Some people really just like the idea of being able to own their own property. There is a freedom of being able to do what you want without having to ask your lenders permission. You may also want to be able to run a business from the house, do work on the house or things that perhaps your lender did not allow. It can just be a nice feeling knowing that your home is no longer partly owned by the bank and that it is all yours too. Do make sure though, that your insurer is happy with any changes you are making to the property, including running a business form the house, you may even need planning permission for change of use, depending on what sort of business you are running.

Have to sacrifice other things

In order to repay your mortgage early, you may have to sacrifice other things. You may have to give up going on holiday, buying treats, having evenings out, eating out, having take away food etc. You may need to be careful of everything that you are buying to make sure that you have enough money left to pay off chunks of mortgage. It could be that you will be really happy to do this so that you will be able to pay off the mortgage but there will be some people that would rather keep the mortgage for longer and enjoy their treats. It will also depend on how much you have to give up. If you have to scrimp and save and only just cover what you need to buy in order to overpay then it might feel very hard compared to someone that only gives up a few things. It will depend on your income and how much the mortgage is, as to how much you will need to sacrifice. Some people will also be more prepared to give up things than others. You could find that you will be happy to give up a lot but other family members want things, so you will have to come to some sort of compromise.

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