Paying Off Mortgage

June 22nd, 2009 | mortgages, uk housing market-

Given the very low interest rates, now is a good time to be making extra mortgage payments in order to pay off outstanding capital.

Especially, in the early years of a mortgages, the mortgage payments are mostly weighted towards interest payments. Only a small % is dedicated to paying off the actual loan. This means that the overall cost of mortgage payments will be higher. If you can make extra payments, it is a good way to make use of the period of low interest rates and reduce the overall cost.

The CML suggest there is a variety of responses to the low interest rates. A significant group of homeowners are making extra payments, whilst others are struggling to meet mortgage payments due to problems such as rising unemployment.

Depending on your type of mortgage you can arrange to increase payments. With interest rates very low, paying off your mortgage is generally going to be a more attractive option than saving.

Also worth considering is an offset mortgage which automatically uses savings in your current account to reduce mortgage debt.

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