Should I Repay My Mortgage?

money and hand

If you are in the enviable position of having a lump sum that's enough to repay your mortgage, is that actually such a good idea from a financial prospect? Should you keep the mortgage but put money aside, or ignore and keep paying it back?

If you are thinking about buying a property in the near future, you will need to consider your repay mortgage options. Many first time buyers will opt for an interest only mortgage. This kind of mortgage gives you the option of paying the interest on your mortgage loan, but not the capital, over a set number of years/months. At the end of the set term, you are expected to pay back the capital in full.

Look At Repayments

Although many people will find that interest only mortgages are cheaper in the short term, you may want to look into repay mortgage options carefully before you take out a mortgage. Repay mortgage options can be especially useful if you are unsure as to how you would go about paying back such a large amount of capital and they can also provide you with extra peace of mind.

If you are looking into your repay mortgage options, you may find that a repayment mortgage is the best option for you.

What is a Repayment Mortgage?

A repayment mortgage allows you to make a set monthly payment each month to cover both your capital loan payment and any interest that has been added onto your loan.

Generally set for between 2-5 years, at which point a review will take place, repayment mortgages can be a great way to keep on track of your finances – your monthly payment amount will not change, thus allowing you to budget more effectively. When you have finished making all of your payments, the property will become yours.

It is worth considering that you must be able to cover your monthly payments as failure to do so can result in a range of negative scenarios, including repossession of your property by the lender.

What About a Big Lump Sum?

Many people may also consider whether or not to repay their mortgage if they come into a substantial amount of money or if they find that their financial situation improves over time. An example of this can be an unexpected amount of money coming in (i.e. from an inheritance or other source of funds) or a large rise in a salary.

Generally speaking, if you do find that you have additional money, it is highly advisable that you repay your mortgage off early. However, you will need to keep a keen eye on the current market when you are taking into account your repay mortgage options. As an example, if the interest rate that you are paying on your mortgage is high in comparison to the amount you are likely to get back from putting money into a savings account; your mortgage should take priority.

Additionally, if you do find yourself receiving money, either as a bulk amount or due to a change in circumstances, you will need to consider any other debts that you have outstanding. Personal loan interest rates can be very high in comparison to repayment mortgages.

To this end, if you have a high-rate personal loan outstanding, it may be wise to pay this off first, before you start to make additional payments on your mortgage. To this end, the repay mortgage options available to you will differ depending on your individual circumstances.

Useful Websites

Add Your Site Here
  • Confused.com
    Discover cheap insurance, loans, mortgages and credit cards with ease. You can even switch your utilities with their comparison service. All major providers - plus you get a robot toy to boot!
  • Bad Credit Mortgages
    If you are looking for a mortgage and have bad credit, CCJ's, defaults or other past payment problems than A Mortgage 4 You can help.
  • Best Mortgages For You
    See which lenders offer the best rates for residential mortgages in the UK. This advisor will search the entire market to locate the most suitable finance for you.
  • Ability 2 Repay
    Broker with access to all the products available in the UK, including schemes for the self employed and people with less than perfect credit history.
  • CompareandSave.com
    Financial best buy services from credit cards, loan and mortgages to insurance products and utilities, Compare and Save.com Your Money Matters
  • helpucover Income Protection Cover
    Income protection cover and mortgage cover offered by helpucover.
  • Add Your Website Here

Further Reading

  • Find A Great Mortgage Online

    Get a great mortgage online or remortgage today. Check out how the internet can get you some great mortgage deals.
  • Find A Mortgage Broker Online

    Mortgage brokers are currently available to you through the internet. Check out our guide to finding a mortgage broker, with excellent rates and repayment options.
  • Where Can I Get a Cheap Loan?

    Get a cheap loan and find out how to save money in this handy article
  • Buying A House Your Options

    When buying a house think of all the ways possible so you get it right for you. Read our simple consumer guides to make sure you don't waste money or time!
  • Getting A Commercial Loan

    Follow our guide to secure the best commercial loan quickly and easily. All you need to know about commercial loans.

Register for updates