How to pay off your mortgage early in 5 steps

Should I overpay my mortgage?

Most people with a mortgage would like to pay it off sooner rather than later.

Standard repayment mortgages usually come with a term of 25 years, however, there are now lenders offering longer terms of 30 years or more. This means it could potentially take three decades before you’re able to repay your mortgage debt and own your home outright. If you’d rather get there quicker, you may want to consider overpaying.

You can pay off your mortgage early by either making overpayments or reducing your mortgage term.

If it’s the former, it’s important to make sure that your mortgage permits overpayments, as in some cases your lender may limit how much you can overpay in any 12-month period (for most fixed rate mortgages this it typically 10% of the balance). Bear this in mind when you want to overpay as well.

Overpaying during the earlier parts of your mortgage term will have a greater effect on reducing your overall mortgage costs, because the sooner you make overpayments, the sooner your mortgage balance reduces and the less interest it accrues.

When deciding whether or not to overpay, one of the key things you can do is consider your mortgage and savings rates, comparing how much you could save by paying off your mortgage with how much you could earn from savings interest.

Essentially, if your savings earn less interest than the amount you pay on your mortgage, you’ll save more money by using it to make overpayments instead. Read our guide to find out more about whether it’s better to save or pay off your mortgage.

5 steps to pay off your mortgage early

Our video below outlines the simple steps you can take to pay off your mortgage early. We've also provided more information below in our five steps to get mortgage-free.

1. Pay extra each month

Overpaying by small amounts each month could be a great way to reduce your mortgage balance without needing to find huge chunks of cash at once. After a while you may not even notice the extra outlay, as it’ll soon become part of your monthly budget.

However, it’s important to make sure you’re not putting all of your disposable income into your mortgage if you haven’t got another financial buffer. You should make sure that you keep the equivalent of at least three months’ salary as an emergency fund, and remember to read our guide on whether it’s preferable to pay off your mortgage or save.

2. Pay a lump sum

Another option could be to pay a lump sum off your mortgage in one go. This could be a good option if you’ve received an inheritance or insurance payout, for example, and want to put the money to good use. Just make sure that you don’t exceed the overpayment limit for the year; check with your mortgage provider if you’re unsure.

3. Remortgage

You could reduce your mortgage interest costs and potentially clear your mortgage sooner by remortgaging. If you remortgage to a cheaper deal, your monthly repayments will be lower, potentially leaving you with extra money that can be used to overpay your mortgage. In fact, by overpaying with the amount you’ve saved each month, you may not even notice it – but it’ll soon show in your mortgage balance. Just make sure you’re remortgaging at the end of your current deal to avoid any early repayment charges.

4. Shorten your mortgage term

Another option when you’re remortgaging is to shorten your mortgage term rather than reduce your monthly payments.

Just bear in mind that, unless your remortgage deal is substantially cheaper, there’s the chance that shortening the term could actually increase your monthly repayments, so it’s important to weigh up the options to strike the right balance between short-term affordability and long-term benefit.

Note that it may be possible to shorten the term part the way through a mortgage deal, but you may incur a penalty for changing the terms of your mortgage, and may also need to complete a new mortgage affordability assessment.

5. Consider an offset mortgage

An offset mortgage has a savings account linked to your mortgage. Your savings are “offset” against your mortgage to essentially reduce your mortgage balance and therefore the amount of interest charged.

Usually, you can choose whether to have this saving reflected in lower mortgage payments or a shorter term, and if you wanted, you could also overpay to save even more. You can find out more about offsetting in our guide to offset mortgages.

Will I be penalised for paying off a mortgage early?

If you stick within the terms of your mortgage agreement – which is usually only overpaying by a maximum of 10% of the balance each year – then you’ll be able to overpay, and potentially pay off your mortgage early, without penalty.

However, you won’t be able to pay off your mortgage completely without being penalised. This is because most mortgage deals with an initial term will apply an Early Repayment Charge, which typically equates to a certain percentage of the mortgage balance. Depending on the size of your mortgage, this can be quite a hefty amount, so it’s important to factor this in to your calculations.

If you’re in a position to pay off your mortgage much earlier than expected, you may want to wait until your initial deal has come to an end and you’ve been moved onto your lender’s standard variable rate (SVR). At this point you’re not tied into the mortgage deal and can repay it without penalty, though you’ll likely still need to pay an exit fee.

Do I need a solicitor to pay off my mortgage?

You don’t technically need a solicitor to pay off a mortgage – you’ll typically just need to make the final payment to your mortgage provider, who should then remove their name from the deeds – but you may want to appoint one to help you through the process and streamline things if you’re unsure.