Mortgage absence is a goal that many people aspire to – however, it can often seem like an uphill battle to be climbed over decades. All is not lost, however, for individuals determined to get rid of this debt, and there are two main ways to do it. Katie Brain, Insight Analyst at Defaqto, spoke to Express.co.uk in an exclusive interview, where she explained how Brits can break free from their mortgages and their potential benefits.
First, she stressed the importance of determining whether a person has to pay off their mortgage at that time.
She said, âNow is a time when people go back to work and try to get back to normal, but they could still have the good habits of saving a little bit each month.
âWe always say have three to six months of funds for a rainy day, but after that you have to take other action and not just sit back.
âYou first have to deal with any unsecured debt that you may have, because the interest rates on mortgages are so low right now, that the interest rate on a card is more likely to be. credit or a car loan, for example, is higher.
READ MORE: Mortgage warning as Brits could save Â£ 5,000 a year – ‘take action’
âIf you have the money to spare, even if it’s Â£ 50 a month, you can use it for your mortgage and it can really make a difference.
âEveryone wants to be mortgage-free, debt-free and retire mortgage-free – that’s a big burden that comes off.
âIf you have the money, this might be a good time to make it work for you. “
However, overpaying is not the only way to achieve mortgage-free status, and for some, alternative action may be more appropriate for their situation.
Ms Brain continued, âRight now is a good time to remortgage – and another thing you can do to move closer to mortgage-free status is remortgage but reduce your term.
âSay you have a 25-year mortgage, you could reduce it by a year or two and save yourself a huge amount of interest.
âYes, you might end up paying more, but maybe not because you might get a lower rate.
âReducing the term means you can end up paying off the mortgage faster and achieve that debt-free position.
âThis is especially the case for a first-time buyer, when individuals move in for the first time, there is so much to pay, and of course, you have to get used to paying the mortgage.
“But after you’ve started a year or two, it might be time to look at the term and narrow it down slightly.”
However, with interest rates low right now and the Bank of England maintaining its base rate at 0.1%, paying off a mortgage may not always be the best use of money.
Instead, Ms Brain said, other options might be better for financial stability.
She concluded, âThere is the argument that you could potentially use the money for something else, like an investment if that’s right for you.
âBut obviously something like that isn’t guaranteed, and you have to be especially brave, realizing that it’s a long-term decision.
âIt really depends on your position. Some people will be more adventurous when it comes to their money and therefore investing might be the better choice.
âHowever, some people are more cautious, especially as they approach retirement, so they might choose to overpay instead.
âIt’s a personal decision at the end of the day, and you have to think very carefully about what you want to do. “