Many millennials today are avoiding mortgages because they cherish the freedom that comes with living the “upwardly mobile” lifestyle. However, this is a dangerous path to toe. By the time you turn 30 you might have spent £53,000 on rent. Wouldn’t you rather get on the property ladder with some of the rent as down payment?
Mortgages have been a drag for many millennials as many are worried about inability to meet up with their obligations, exorbitant interest rates and never truly getting mortgage free. With the right guidance, however, literally anyone can become mortgage free. Here are two main ways to do this:
Using your savings account
You may not know it but your savings account also holds the key to clearing your mortgage early and you don’t have to pay any extra cash. You only need to have a decent sum saved up. This method is known as using an offset mortgage. With this method, your savings account is linked to your mortgage account. The savings are then offset against your mortgage debt thereby reducing the mortgage amount and the interest that would have been paid on it.
You don’t lose access to your savings and you can add more money to the pot at any time to further reduce your mortgage debt. It is important to note though that your savings pot used here will not grow. Savings account yield very little these days anyway so this shouldn’t be a deal breaker. Most big lenders offer this type of mortgage deal.
When you get a mortgage, you are allowed to overpay by a specific amount each year without any charges. Most of the time, this is no more than 10% of your mortgage balance. You will only be hit with an early repayment charge if you go above this limit.
So if you are able to, try to spend a bit more when researching a mortgage, and you can drastically cut down how long it will take you to become mortgage free. By increasing your mortgage by an extra £100, you can cut off 4 years of repayments from your mortgage and most importantly, save over £12,000 in interest for a £150,000 mortgage deal. Don’t know how to squirrel away a bit more money for mortgage overpayments? Here are some tips you can work with.
With these two methods, you can become mortgage free as a millennial in little time. You only need some level of discipline to see through any approach you elect to go with. All the financial experts are warning of how badly the millennial generation will be affected when they come to the age of retirement.
As older generations live longer, they require more money to pay for their care and this comes from the earnings of their kids and grandkids. We can expect to see more strain being put on the millennial generation throughout their working lives, so having a financial plan in place now will ensure that you’ll be able to enjoy your own retirement when it comes round.