Should You Pay Off Your Mortgage Early? Pros and Cons Explained, 2023. Lara Joanna Jarvis.

hi guys and welcome back to my channel So today we're going to be diving into an important topic all around mortgages and that is the question of whether to pay off your mortgage sooner whether to make overpayments whether to reduce your mortgage whether to save the money elsewhere or work towards other financial goals so we are going to be talking about the pros and the cons of paying your mortgage off early here in the UK for anyone that would be interested in the topic a lovely viewer did actually suggest I make this video so I thought it's a great idea so here we go with some pros and cons and even how to pay off your mortgage and some ideas around the concept of paying off your mortgage sooner for anyone that's looking into it it goes without saying I am not a mortgage advisor I'm not a financial advisor so make sure you are doing your own research when it comes to these important financial decisions all of the points that I've raised here in this video is my own opinion my own thoughts around the matter and some research that I've done into it as well and also one little disclaimer that I would love to include in this video is to make sure that you have your emergency fund save saved up before you go about any additional financial goals and savings because this is a sort of fund that you can have in your account to fund anything that may be going wrong financially maybe you need a new dishwasher maybe you need some new car parts to fix your car to be able to get to work the emergency fund is one of those non-negotiables and if you aren't in the position to have an emergency fund at the moment then it's something to work towards and by no means is this video aimed at everybody some people will not have a mortgage in the first place some people will not have the ability to overpay their mortgage but we're going to be diving into all of the information and hopefully it's informative for you guys don't forget to subscribe to the channel if you're new here I'm Lara and I'd love to have you here in this community where we talk about your financial well-being and living your best life on a budget anyway without further Ado grab yourself a cover and let's get into the video thank you [Music] okay so first of all I would love to know would you consider paying off your mortgage if you had the option of course or would you choose to go down a different Financial route I would love to know in the comments if you want to get involved I just really enjoy seeing the conversation sparking off in the comments and obviously you guys will have different ideas to what I have and different opinions and even different experiences it's really important if you do want to share anything that you do so in the comments because it just really helps other people reading the comments to know the sort of like balanced view as well so when it comes to your mortgages there are different kinds of mortgages and of course everyone is going to have a different mortgage situation so when you took out your mortgage it may well be a fixed rate mortgage it won't May well be variable term you may have a two-year mortgage a five-year mortgage there's obviously loads of different products in the UK and unfortunately with you know the current mortgage rates here in the UK they are increasing so much at the moment so maybe you locked in two years ago to a two-year fixed term and actually now you're having to remortgage and of course you're now looking at more like six percent seven percent on your mortgage depending on the amount that you own of your house there are also different factors so obviously depending on how long you have left on your mortgage term whether there are any penalties on overpaying your mortgage as well so it's really important that you make sure you know exactly the facts that you're dealing with when it comes to your own personal situation because everyone's different you know there's people watching this that may well be in their 60s that have had a mortgage for 40 years and they're close to paying it off or perhaps you know like us so we got a really late in life mortgage and we obviously have a shorter term to pay it often because we only have you know not as long left in life if them if we were to get it in our 20s so our situation will be completely different to other people's situations and you know you may well be that you've remortgaged each two or five years to get a new product and you may want to be doing work to the house or to pay off any bills or anything like that or you know get additional Financial all property as well so there's lots of different types of mortgage situations and no one is in the same boat as the other person so it's sort of like a you can't really blanket statement anything like this because everyone is different there are different ways of paying off your mortgage faster so whether that be overpayment but as I said check that you won't incur any penalties or fees for that you could re-mortgage or you could pay fees up front so shall we start with a positive let's start off with the pros of paying off your mortgage early in the UK now first of all as I said you need to prioritize other debts before mortgage because a mortgage is probably the lowest well maybe not at the moment but the lowest rate in return APR than any other loan that you'll probably ever get for the most part so if you have higher debts out there that are maybe 20 30 if you have store cards then it's really it makes no sense to be paying off your mortgage which is a really really low debt fee compared to paying off you know if you then have debt for store cards credit cards that are way more so it's really worth making sure that you're making informed decisions so that you are choosing the right option that suits your own personal circumstance okay so probably the most obvious Pro of paying off your mortgage early is the financial peace of mind you know you're mortgage free you only have I say only there's a lot of expense when it comes to your electricity and your food bill let's be honest paying off your mortgage gives that peace of mind to know that your property is your own you don't owe it to the bank the bank owns nothing for your property and if you know anything should happen to you you know and you can't work for example you know your main Bill your most expensive bill of the month is taken care of that isn't one so with this it reduces the stress that you may well be under for paying off this big expensive Bill obviously as you get throughout the term of your mortgage and throughout the the debt and decreases the payments will be lower and you will end up paying back actual value of the house rather than uh any interest but it also gives you ability to then put those funds towards other areas of your life and financial goals whether that is your stocks and shares Isa maybe you might want to put it towards your pension maybe you might want to put it towards a second property or living life go on holiday more going like spend money on other people that you love to be around and family and supporting them perhaps essentially the main Pro that I would say from this is it gives you that Financial Freedom and that ability to focus on other areas of your life without the stress that sort of weighing you down knowing you have a big payment to pay out each month it also allows you the flexibility and the freedom to make other decisions with your money which is really important okay so point two and this for me is almost as big a deal just because it's exciting is the interest saving opportunity now paying off your mortgage early providers you don't have any fees or penalties that's just like a caveat every time I say this just know that's that is what I mean as well means that you are going to be able to save so much interest on the loan and just like the magic of compound interest it works the other way so if you have a lot of interest and a bigger debt then obviously compounded you'll be paying off so much money just in interest alone at the beginning of the loan so to pay it off sooner will mean that you obviously pay less interest in the long term which can be hundreds of thousands of pounds depending on the size of your mortgage definitely thousands of pounds and what are we going to do with that sweet sweet interest that we're saving we can invest it in other Financial products such as your pension and your lifetime Isa and your additional savings goals anything that you may well use that money instead of paying interest it can go towards any of those financial products if you are able to shave off two years of your interest every time you remortgage you could actually pay off your mortgage in as little as 14 years and when you think of the amount of Interest you're spending or paying over the course of a 48 interest that 40 year mortgage that is going to save you an absolute Fortune you could also choose to reduce your turn by one year depending on your financial situation it's just giving yourself that choice and that option but because your payments are going to be over a short period of time obviously they're going to be a higher price so just make sure you're not leaving yourself open to any financial difficulty make sure you can afford to pay it off the next Point number three of Pros is increased Equity paying off your mortgage early is going to increase your Equity that is the amount that you own of the house so say for example you put down a 10 deposit you own 10 of the house and 90 is a mortgage as you work your way up through the mortgage and you're paying off each more each year and you pay off more and more of the debt then you own more of the house so for example if you pay off if you can get to 25 of the house owned then the bank will only own 75 of it and even if you aren't paying a mortgage early in full giving yourself that chance of giving of earning extra equity in your house can definitely alleviate the burden of a large mortgage so even if it's just that you own 50 of your house which is massive by the way but if you do own 50 it's not to say you have to earn the whole house because it will alleviate you know if there's any if you have to sell and the market has dropped 20 and you're still and you own 50 of it you're still not going to be underwater or it means that it's a more valuable asset if you're downsizing and you'll have more money to put into another property that you might want to buy a lower price and then you will actually end up owning more of the next property it also improves your cash flow so freeing up that monthly payment if you suddenly half your payment obviously that is all cash in the bank giving you more Financial Security and more things to be or more money to be able to put into other endeavors even educating yourself or learning a new trade or re-schooling yourself about something giving you the options and the choice and the freedom essentially having more Financial Freedom more Equity less payments is just going to give you that better sense of freedom and ability to you know save more for your emergency fund or go on a dream holiday or treat your family or anything that you're looking to do and that you have wanted to do okay so now we're going to go on to the cons of paying off your mortgage early and you may well be thinking what why is there anything negative about this surely it's all an amazing idea to do it but there are some cons and we're going to be talking about those but before I do that if you are enjoying the video I'd love to have you as a subscriber to the channel I'm Lara and as I said I'd love to give you finance ideas and just ways to live your best life on a budget here on this channel we have an amazing community over on Facebook as well which is best budget budget best life and it's free to join and there's loads of like-minded people over there as well all talking about our financial goals and getting support if they need it with debt or not being able to pay their grocery bills or whatever it may be so come over and join that as well and be part of the community okay so it goes without saying a con of buying paying for your mortgage off early is that it diverts funds away from other areas of your life so if you are maybe wanting to do more holidays or you want to buy a new car or you just want to buy even another property is going to take the money away from that ability to do that and maybe make things longer term savings goals and as I said before committing to paying off your mortgage make sure you're prioritizing other debts that may well be higher before going in to pay off your mortgage sooner because it just makes no sense we're paying off a really expensive debt over a longer term when you could use that money that you're overpaying your mortgage on to pay that off first paying off your mortgage if you are doing that rather than using those funds to put into high interest savings accounts or stocks and shares or Isis then actually the potential of growth saving the money in a different account could actually work out much more beneficial although as with any investing is not guaranteed returns are not guaranteed but for me it feels like I know that there's been a hundred years of research or consistent returns that I know that I feel safe in doing that as long as I do it sensibly I don't know whether to share this with you in this video um I will do but do your own research into this but I have actually a referral code or link which I will leave you in the description bar for trading 212 where they will give you a free share up to the value of 100 pounds and even if you're buying shares in potentially the ftse 100 uh the S P 500 for me I've had them maybe four or five years and they've returned 20 25 year and year so if for me it's a safe bet but if you want to just try it you can never tried investing it is something that takes a long time to get into and to understand but to get a free share if you want it I'll share my link in the description bar but we digress we're not talking about shares in this video but for me yes it means that if you're overpaying your mortgage and you're saving yourself interest there you may well actually be earning more interest in something like a lifetime Isa or stocks and shares Isa over the course of say 20 years which would be your mortgage term and of course with these assets they compound over time as well so although you are having your mortgage repayment like I said if it's only a two percent uh interest on that and actually you can compound the interest on a seven to nine percent year-on-year growth on your Investments then obviously compound interest I've done a whole video on it I'll try and Link it below for you it's it's amazing but when it works in your favor it's good on a debt side of thing not so good there's also lost tax advantages so paying off your mortgage early might actually mean that you miss out on tax advantages such as mortgage interest deductions it just got really dark in here but again really really important that you enlist the support and the advice of a financial advisor or a mortgage advisor to make these big financial decisions the next one is liquidity and cash reserves paying off your mortgage early ties up a considerable amount of money and that is your liquid assets your cash in the bank so consider whether it's a sensible idea as I said with everything everything in moderation you know you don't want to put all your eggs in one basket and then throw an emergency to crop up and you not to have that money in the bank that just would not make any sense to me future interest rate deductions is something to consider so for example we're not it's not great at the moment with mortgages with interest rates but we've had historically low mortgage interest rates so if for example say you're looking now six percent seven percent and then in a couple of years time I can't see it but if it drops back down low and you have the opportunity to look into a really really low interest rate repayment then actually it means that you could potentially use that money elsewhere on something that would have cost you a lot more money and interest instead of re paying off the mortgage and then not being able to pull back on that really low interest rate loan it's really important to keep your eye on interest rates although it can be something that is terrifying at the moment if you are looking to if you are having to remortgage but just to keep your eye on that as well to make sure you know what's good and what's happening in the market I me as I see it the main con of paying off your mortgage early is simply that you could use those funds to fund your Isa your stocks and shares I sell another Financial goal of yours that actually could then bring in more money than you are saving on your mortgage product but to be fair over the time over the years you will save so much money and interest that is sort of like is there really an answer it's really hard to give a conclusion because everyone's situation is different but that would be the major con for me deciding on whether to pay for your mortgage early is a huge financial decision and one that you would need the support of actual Financial professionals but hopefully this has maybe opened up some conversations with your loved ones or with your own family that you might want to discuss this with to see what works for you what is the best solution for you because as I said everyone's situation is very different hopefully this will give you those tools to make informed decisions and make those that actually align with your own values and your own goals I hope that the video has been informative if you were looking for a bit of information please do let us know in the comments would you if you had the choice pay off your mortgage earlier or would you use that money to fund something else do get involved in the comments thank you guys so much for watching do give it a like if you enjoyed it and I'll be back really soon and if you have anything like this like the lady suggested me make a video on leave it below and we can get the conversation started thanks for watching guys and I'll see you soon bye

Channel: Lara Joanna Jarvis

Views: 16,657

Keywords: lara joanna jarvis, mortgage, pay off mortgage early, mortgage payoff strategies, UK homeowners, financial advice, mortgage pros and cons, mortgage tips, early mortgage repayment, mortgage interest savings, financial freedom, mortgage payoff benefits, mortgage payment, mortgage strategies, UK property, mortgage decisions

Id: v4vk31Op3J8

Length: 16min 7sec (967 seconds)

Published: Thu Jun 01 2023