7 ways to cut years off your mortgage

The secrets to cutting your mortgage bill revealed

Felicity Hannah - Virgin Money Living Mentor

by Felicity Hannah | Independent Money Mentor

Award-winning personal finance and consumer affairs journalist

Your mortgage is probably one of your biggest monthly bills. Imagine life without that massive outgoing – what could you do with the extra money each month? Okay, now stop imagining and start making it happen.

Here are seven ways you could shave years off your mortgage term. And if any of these money-saving tips are of interest to you, then be sure to check with your mortgage lender first to ensure it fits with your mortgage agreement.

1. Make regular overpayments

Every pound you overpay early on your mortgage adds up to some serious savings later on. The comparison site comparethemarket.com worked out that adding 10 percent to the average monthly mortgage payment would cost just £59, but it would save £1,870 overall in interest and slash your mortgage term by 16 months.

Of course, the amount you could save will depend on your personal circumstances. Have a look at this useful overpayment calculator available via the MoneySavingExpert website to see how much you could save.

Many lenders only allow a fixed amount of overpayments a year, often around 10 percent. Check what yours allows you to do. After that there may be a penalty to pay. Instead of paying a penalty, save up anything over the allowance and use it to pay off a chunk when you come to re-mortgage. The more you can pay, the faster you’ll repay your mortgage.

2. Take in a lodger 

Did you know that under the government’s Rent A Room scheme you can make thousands of pounds a year, tax free?

It lets you earn up to £7,500 a year from renting out a furnished room in your home and you don’t even have to include it on a tax return. You can rent out more than one room if you like, although if you make more than the cap you’ll need to complete a tax return.

If you poured that cash into your mortgage or savings for when you re-mortgage then you could dramatically cut your mortgage term.

3. Rent out your drive

If taking in a lodger sounds too much effort, there are other ways of getting your house to help pay its way. One obscure but useful way to do so is by renting out your drive. 

If you’re out during the day and your driveway is empty then why not rent it to someone who works near your home? There are many websites that let you advertise, including Park On My Drive, Just Park and Your Parking Space.

The amount your drive is worth depends on your location; if you’re near a city centre, an airport or a stadium then your tarmac could be a bit of a goldmine. But even if you’re not, earning a small but regular amount can soon add up.

Stash the cash in an account ready to include the next time you remortgage.

4. Use an offset mortgage

With an offset deal you match your savings to your mortgage, meaning you don’t pay interest on the amount you have saved. For example, if you owe £100,000 on your mortgage and have £10,000 in a linked account then you only pay interest on £90,000.

It can help you clear your mortgage much quicker and is a good way to make your money work harder in a low-interest rate world. You can still access your cash when you need it.

However, the downside is that you don’t usually earn interest on your savings and you may be paying a higher mortgage rate, if you don’t shop around. It’s really important to do your sums and check you’d be better off before making the leap.

5. Earn some cashback

Websites and cards that offer cashback allow you to make money as you spend it – and that money can be kept to one side and dedicated to your mortgage.

There are cashback credit cards, cashback current accounts and websites like Quidco and TopCashback that allow you to earn a percentage of your everyday spending if you do it through their sites.

Don’t be sucked into using a product that doesn’t work for you – cashback credit cards are only suitable if you know you can clear the debt and cashback current accounts often come with a fee – but do make the most of every suitable cashback opportunity.

Remember, when you’re paying interest on a mortgage for years and years, every little really does help.

6. Cut your bills

Apathy about household bills costs us all a lot of money, but freeing up those extra pounds can make a big difference to your biggest bill.

For example, if you haven’t switched your energy provider, insurer or phone company recently then you could make some easy savings simply by moving to the best deal for you.

Of course, that cash will only help your mortgage if you’re strict with yourself about ring fencing it.

7. Hand over your lump sums

There’s nothing quite as satisfying as a cash windfall, whether it’s a bonus from work or a gift or somebody finally buying the rights to your life story.

The temptation is to splash the cash: get the kitchen done, go on holiday and buy that personalised hang-glider you’ve been hankering after. However, if you can spare any extra cash to overpay the mortgage then in the longer term you’ll have more cash every month for those extras. Aim to dedicate any windfalls to the mortgage fund, remembering to check your mortgage arrangement to see if any overpayment penalties apply.

Little savings add up, there’s no time like the present and those extra years of a mortgage-free life is worth working towards. Over to you!

Before making financial decisions always do research, or talk to a financial adviser. Views are those of our mentors and customers and do not constitute financial advice.