I and A Mag Sep19

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Is Early Repayment Right? FOR YOUR MORTGAGE? If you have money left over at the end of each month, or have received an unexpected lump sum, you may be thinking about paying off your mortgage early. You can save large amounts in interest and potentially cut your mortgage term by years but, depending on your circumstances, it might not be the best option. So what factors do you need to consider before deciding whether to clear your mortgage early? Here are a few questions to get you thinking. Does your mortgage allow for overpayments? Not all mortgage products let you overpay and some will charge you for doing so, but many allow borrowers to overpay up to 10% of the outstanding mortgage with no penalties. If you’re not sure about the terms and conditions of your mortgage, get in touch with your lender or check the original documentation. Are you enrolled in any pension schemes? If you’re currently paying into a pension scheme it could be more beneficial in the long run to increase your contributions because of the tax relief offered by the government. If not, consider using the extra money to start saving tax-efficiently for your retirement – the earlier you start a pension the better your chances of a financially comfortable older age. What are the current savings rates? Although savings rates have been extremely low in recent years, there may be a fixed rate or longer term savings account that offers a higher rate of interest than that charged by your mortgage lender. Even if it’s only fixed at a higher rate for two or three years, as long as the interest rate after tax is higher than your mortgage rate it would make financial sense to earn this additional interest on your money. Do you have significant unsecured debt? Paying off more expensive debt such as credit card and store card balances, and unsecured loans, is always a good idea if you have residual income, and should be prioritised over paying extra sums to your mortgage. Once this type of debt is paid off you’ll automatically increase the amount of money you have available each month and can then consider overpaying your mortgage, which is a lower cost debt. Do you need extra life insurance? You probably had to take out a life insurance policy to cover your mortgage loan, but it might only cover death rather than illness or disability. It’s a good idea to review your insurance needs from time to time to ensure various possibilities are covered. You may want to increase the amount on a particular policy, for example, or change from a fixed period that covers your mortgage term to a ‘whole-of-life’ policy where the timing of a payout isn’t restricted. Do you have an emergency fund? If you lost your job, could you pay the bills for at least six months? If not, it would be worthwhile building an emergency fund with your residual income rather than paying down the mortgage. An emergency fund provides a financial ‘buffer’ in the event of job loss or other unexpected life event, such as having to reduce your hours due to long-term illness. It takes away some of the pressure when you’re already in a stressful situation. These are just some of the factors that might influence your decision to repay your mortgage early, but what are the potential advantages and disadvantages if you decide to go ahead? Advantages of paying off your mortgage early • You may be able to reduce your mortgage term by many years depending on the amount outstanding, and enjoy greater financial freedom in retirement. • You’re likely to pay considerably less interest. • You’ll enjoy greater flexibility in your monthly budget once the mortgage is repaid. • Property is considered a safe investment on the whole, but even if the market became unstable you’d be protected from financial uncertainty. • You can achieve peace of mind and a greater feeling of security knowing your home is paid for. Potential disadvantages of early repayment • Property is an ‘illiquid’ asset, which means it could take a long time to access the cash invested in it. Unless you also have liquid assets such as stocks and shares or cash in an emergency fund, you may struggle financially in the event of a personal emergency or economic downturn. • If you’re channelling all your residual income to your mortgage there may not be money left to save for other large purchases, such as a car, wedding, or holiday, which could force you to take out more expensive unsecured borrowing. A mortgage is typically the largest debt that people take on. It represents a huge financial commitment whatever your stage of life and paying it off early always seems a very attractive option at first glance. Before you do, though, consider some of the other areas where the money could be put to better use, at least for a while – then you can go ahead with confidence and potentially shave years off your mortgage term. www.moneyadviceservice.org.uk/en/articles/should-you-payoff-your-mortgage-early by Ann Haldon 8
PROPERTY Smooth Move this autumn at Haygate Fields, Wellington Our new community looks out over the famous landmark Wrekin and our homes offer some superb views. Choose from a range of 3, 4 and 5 bedroom homes that also include an upgraded specification – making them stand out from the crowd. This autumn we’re offering you the choice of three fantastic offers to help you make that move so why not visit us today and see how you can get moving. Our new range starts from only £239,995 Haygate Fields, Wellington Shropshire TF1 2DA 01952 305 051 Choose one of the following to help get you moving: 1 5% deposit match* 2 Home Exchange plus flooring** 3 Home Exchange plus stamp duty paid bovishomes.co.uk For reservations taken between 04/07/2019 until the 31/10/2019 04/05/2019 and only one option is to be used against any one reservation. Full or partial Stamp Duty may be paid on selected plots. Stamp Duty not available to Investor sales. 5% deposit match is available on homes up to the value of £400,000 and includes first and second time buyers but it is not available with the Help to Buy scheme. Flooring is included from our standard range and upgraded specification varies from plot to plot, please a sales adviser for more details. +Home exchange scheme is subject to independent valuations, survey and contract on your existing property and is subject to criteria, which include the property you are selling is worth no more than 75% of the value of the new Bovis Home you wish to purchase. Home Exchange market value figures are based on reports from 2 independent local NAEA registered agents for a selling period of 8 weeks. Available of selected plots only. Maximum property price excepted via the Home exchange scheme is £400,000Photograph depicts a typical Bovis Home exterior/ interior. Elevation may differ to that shown. Internal images may include optional upgrades at an additional cost. Price & availability correct at time of going to print/broadcast. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. Ask our sales advisor for details. 9
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