THE prospect of being free from your monthly home loan payments might seem like a distant dream.

But if you're clever with your cash, everyday savings on bills and shopping can be put towards extra mortgage payments so that you'll be debt-free sooner than you think.

We'll show you how you could save £6,090 a year in five easy steps and pay back your mortgage 12 years early. Plus, it would save you a massive £13,995 in interest.

If you want to save money, of course it makes sense to start by looking at your biggest bill first and that's almost certainly your home loan itself.

But it's important you don't pay off more than you can afford and end up having to cover your living costs with expensive loans by going into your overdraft.

Here are the steps you should follow to help pay off your mortgage quicker.

Step 1: Switch your mortgage to a cheaper deal

As long as you're not already locked into a fixed rate or a deal that is discounted for a set period of time, you should be free to switch your home loan without paying a penalty.

Interest rates are expected to rise again soon, there's no time to lose as mortgage lenders have already started to put up costs for borrowers.

Aaron Strutt, of mortgage broker Trinity Financial, says: "Lenders are still offering some incredibly cheap rates so it’s a great time to switch deals.

"Rates are likely to rise in the near future."

If you've rolled on to your lender's standard variable rate – which is what you pay when you come to the end of a fixed-rate deal – there are massive savings to be made.

Adrian Anderson, director of mortgage broker Anderson Harris, says: "If you are on your lender’s standard variable rate, you are probably paying more than you need to for your mortgage.

"Remortgaging onto a cheaper rate, such as a two or five-year fixed rate, will save you money,  but if you keep the payments at the same level as you had got used to paying, you will clear your mortgage ahead of schedule."

The cheapest mortgage deals right now

IF you are looking to switch your home loan, theseare the lowest rates currently available according to Moneyfacts:

• The cheapest two-year fixed rate currently on offer is 1.41 per cent with a £495 fee from Yorkshire Building Society. You'll need a deposit of 35 per cent to qualify.
• If you've got a lower, 25 per cent deposit, the cheapest two-year fixed is also from Yorkshire at a slightly higher rate of 1.46 per cent with the same fee.
• With a 25 per deposit you can fix for three years with Tesco Bank at 1.83 per cent with no fees.
• For borrowers who want longer protection against interest rate rises, Metro Bank is offering a five-year fixed rate at 1.99 per cent if you have a 20 per cent deposit. It comes with a £999 fee.

The average standard variable rate is currently 4.77 per cent according to comparison website Moneyfacts, which amounts to monthly payments of £857 on a £150,000 home loan.

But switch to the cheapest deal on the market with a rate of just 1.41 per cent and your payments will drop to £594 a month.

Even after fees, this means you would see your annual mortgage costs fall from £10,284 to £7,627 – a whopping saving of £2,657.

Step 2: slash your household bills

There are massive savings to be made by regularly switching your car insurance, home cover and energy supplier to make sure that you are always paying the best possible price.

When it comes to insurance, make sure that you keep a note in your diary of the dates your policies expire so that you're never automatically switched onto a new contract with the same insurer. Loyalty doesn't pay.

Comparison website GoCompare estimates that most people could save up to £280 a year on their car cover and a further £94 a year on home insurance.

Many of the major energy suppliers have been hiking their costs in recent weeks so if you haven't switched in a while and you've rolled onto a standard tariff then you'll end up paying over the odds.

Switching your energy deal is likely to save most households around £200 a year, according to GoCompare.

Meanwhile uSwitch, another comparison website, estimates you could save up to £190 a year by switching broadband provider and up to £250 by switching your mobile contract.

Haggle your way to a cheaper mobile deal

THE best time to haggle is when you are close to the end of your contract or the tie-in period has already expired

• Sim-only deals offer the best savings.
• Don't get sucked into paying for more data and minutes than you really need.
• Find out what other deals are out there by using comparison websites.
• Once you've found a better package from a rival firm, ask your provider to match it.
• Don't take their first offer, you can always call back and try again if it's not good enough.
• If they can't match the exact price you are looking for ask what extras they are willing to throw in.

Step 3: shop smarter at the supermarket

You don't have to put your whole family on rations to save money on your shopping.

Try the "downshift challenge" where you swap brand names and supermarket's premium lines for their cheaper alternatives.

MoneySavingExpert estimates that this could cut your supermarket bills by as much as 30 per cent.

For a family that spends £100 a week at the checkout that's a saving of £1,500 a year.

Here’s how to cut the cost of your grocery shop

SAVING on your shop can make a big difference to your wallet.

Here are some tips from Hannah Maundrell, editor of Money.co.uk, about how you can cut the cost of your shopping bills:

• Write yourself a list – Only buy items that you need. If it isn’t on your list, don’t put it in the trolley
• Create a budget – Work out a weekly budget for your food shopping
• Never shop hungry – you are far more likely to buy  more food if your tummy is rumbling
• Don’t buy pre-chopped veggies or fruit – The extra they’ll charge for chopping can be eye watering
• Use social media – follow your favourite retailers to find out about the latest deals
• Be disloyal – You may want to go to different stores to find the best bargains
• Check the small print –  It’s always worth checking the price per kg/lb/litre when comparing offers so you’re making a like for like decision as a bigger box won’t necessarily mean you get more
• Use your loyalty cards – Don’t be afraid to sign up to them all. They all work slightly differently – work out what bonus suits you better and remember to trade in your points for additional rewards

Step 4: cut out the takeaway coffees and pack your own lunch

If you tend to buy your lunch on the go, it's scary to look at how quickly the costs add up.

Lunch from Pret a Manger or any other high street chain will often set you back at least £5 a day. Add in a coffee and that's more than £7.

But here comes the terrifying bit. Over the course of a year, that amounts to £1,820.

Get into the habit of making an extra portion when you cook your evening meal and buy a cafetiere that you can use at work.

You could easily halve your costs, giving you an extra £910 a year.

Step 5: make extra mortgage payments

Adding up the savings from all our money saving tips could give you an extra £6,090 a year.

If you are super thrifty you might even be able to save more.

Most lenders will let you overpay 10 per cent of your outstanding mortgage balance each year without penalty.

Some lenders will let you pay up to 20 per cent extra, but it is vital to check with your bank first as if you overstep the rules you could be hit with a hefty early repayment charge.

So let's assume that you have a £150,000 mortgage on a repayment term of 25 years and you have now switched it to the cheapest deal in the market which is 1.41 per cent.

MORE ON MONEY

But remember, don't pay off more than you can afford.

Mark Harris, chief executive of mortgage broker SPF Private Clients says: "Keep at least six month’s expenditure back for emergencies as money overpaid is notoriously difficult to access again."

Check out this handy calculator from MoneySavingExpert which shows you exactly how much you could save by making mortgage overpayments.

Source: Read Full Article