A standard repayment mortgage can take between 25 and 30 years to be repaid. During that time we pay both capital repayment and interest on the outstanding balance. Because the loan is for a long time, it means that the interest payments on a mortgage can be greater than the total capital debt. Through paying off a mortgage faster, we can save paying interest payments and make significant savings. This table shows some examples of how much we can save, if we are able to pay off a mortgage faster.
This assumes a standard repayment mortgage with an average interest rate of 7%
Mortgage Balance 30 Year Mortgage Term 25 year 20 year 15 years £150,000 £359,263.35 £318,050.64 £279,107.62 £242,683 £125,000 £299,386.12 £265,236.36 £232,589 £202,236.36 £100,000 £239,508.90 £212,033.76 £186,071.74 £161,789.09
This shows that on a £150,000 mortgage interest payments on a 30 year mortgage accounts for a total of £204,000. If you were to pay off the mortgage in 15 years, total interest payments would be only: £92,000. Thus you would save nearly £112,000 in lower interst payments.
Of course, the thing to bear in mind is whether you can actually afford to make the extra payments necessary.
Also, don’t forget the extra payments could be used for investing into a pension or other saving scheme.