It is not uncommon for homeowners reaching the final few years of their mortgages to consider repaying the outstanding balance in full. Some have sufficient savings to cover their remaining debts, whereas others consider the use of personal loans and similar financial products to clear their mortgages.

There are, however, many instances where renegotiating an existing mortgage can be simpler and more cost-effective than paying off a mortgage early with a personal loan. Options vary from one case to the next, depending on the terms and conditions of the client’s current mortgage.

An Important Financial Safety Net

The first thing to consider is whether or not paying off your mortgage with your savings is a good idea. If doing so would mean utilising all or most of your savings, you may subsequently be left with no financial safety net. Even if you are predominantly debt-free and have a regular source of income, it is rarely advisable to wipe out your savings entirely, in case of unforeseen eventualities or financial emergencies.

While a personal loan may be easy to arrange and could indeed be used to repay a small outstanding mortgage balance, it is rarely a cost-effective option. This is due to the fact that annual interest rates on personal loans can be considerably higher than a typical mortgage refinance product.

Depending on your requirements and the lender you work with, you could end up paying as much as ten times more in interest on a personal loan than an equivalent remortgage deal.

A Case of Careful Negotiation

The most affordable way to repay a mortgage balance in full within the last couple of years of the loan is to negotiate a refinance deal with a competitive lender. It is worth bearing in mind that most major lenders are unwilling to offer mortgage products over periods of less than five years.

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You will therefore need to work with an independent broker, who can help you find a competitive deal from a specialist lender away from the UK High Street.

Independent lenders who specialise in these types of short-term mortgages are often willing to offer refinance deals over shorter periods, as low as 1 year. You can use an online mortgage calculator to get an idea of your repayment obligations and the potential savings you could make, which could be significantly greater than with any comparable personal loan.

The independent mortgage broker you work with will handle the negotiations on your behalf and compare deals from an extensive panel of specialist lenders. Most of which operate exclusively via independent brokers and do not offer their services directly to the consumer.

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