How to become mortgage free in the UK

Living mortgage-free doesn’t have to be a pipe dream.

With forward-thinking and a plan in place, you can pay off your mortgage and no longer face the burden of monthly repayments

Mortgage terms are typically 25 years, so if you took one out aged 25, you’d be 50 by the time you pay it off – and that’s if you haven’t extended the term.

Are you ready to bring down the repayment years to live mortgage-free?

Here’s how it’s done.

What are the benefits of being mortgage-free?

Having more disposable income and no interest to pay are just some of the benefits of being mortgage-free.

When you pay off your mortgage, you’ll have much more money to put into your savings, spend on yourself and access when needed.

On top of this, you’ll have the peace of mind from knowing that your home is yours – to keep, sell or bequeath to your family as you wish, with no more debt to service.

That’s not all. Mortgages cost an extortionate amount.

Pay it off early, and you could save tens of thousands of pounds in potential interest.

What’s more, the amount you’ll save on interest will often outweigh the interest you’d get via a savings account.

Many financial commentators suggest – with a few caveats – that paying off a mortgage is a better long-term use of excess income than putting it into savings, although it is always important to compare the value of putting money into tax-free savings at a high rate compared with the rate on your mortgage when making these calculations.

Here's a quick summary of the main benefits of becoming mortgage free and the impact on your finances:

However, the path to living mortgage-free has a few pitfalls to watch out for.

You’ll need to be wary of early repayment fees, and it may be wise to pay off other, more expensive debt first.

You should also make sure you have enough other savings (or similar ‘liquid’ assets) to fund your spending in the meantime or help you in emergencies – as money ploughed into your property isn’t accessible until you sell it.

If you don’t have adequate savings for your retirement, or have a particularly low fixed mortgage rate you may be better diverting money into a tax-free savings account or your pension before focussing on your mortgage.

If you still want to try and become mortgage-free, here’s how to go about it cost effectively.

1. Create a clear mortgage repayment plan

Simply upping your mortgage payments will help you pay your mortgage off faster, but perhaps not as quickly as you’d like.

Lots of us don’t even know the age we’re expected to make our last mortgage payment on our current term.

Find out how long you’ve got left on your mortgage, and think about when you’d like to pay it off.

You can then look at your monthly outgoings to budget how much extra you can afford to pay.

2. How to overpay your mortgage and avoid early repayment charges

Mortgage overpayment means paying more than your required monthly amount, reducing your outstanding balance faster and cutting the total interest paid.

You can overpay your mortgage either by increasing your monthly payments or by paying off a lump sum.

However, there can be additional fees involved to deter you from paying off too quickly.

Most lenders will let you overpay by up to 10% each year before you incur fees, so check your mortgage terms and do your calculations to avoid overstepping the upper limit.

Although the fees may seem harsh, the 10% allowance is generous.

If you have a £100,000 mortgage, you could pay off a lump sum of £10,000 in a year without getting penalised.

However, be aware that some mortgage providers will look to reduce your monthly repayment amount if you start regularly overpaying.

It can happen automatically and be quite a shock, so speak to your provider and make sure your payment stays fixed (otherwise, your overpayment efforts will be cancelled out by the monthly reduction).

If you have Early Repayment Charges on your current deal it may be sensible to divert money into a high-interest savings account to give it time to grow before paying a lump sum off your mortgage when your current deal ends and the charges no longer apply. 

If you can use your annual Isa allowance, or personal savings allowance for this, you won’t pay any tax on the interest payments on this savings account.

3. How a shorter mortgage term helps you become mortgage-free faster

Some lenders will be willing to offer you a shorter mortgage term to help you to clear your mortgage more quickly, so when you remortgage, find out if this is possible.

Your monthly payments will be higher, though. Let’s use the £100,000 mortgage example again.

If you have the loan for 25 years and pay 5% interest, your monthly repayments will be £585.

But if you shorten the term to 20 years, your monthly repayments will be £660. That means you’d need to factor in paying an additional £178 a month.

This may seem doable, but the difference can be much higher for many mortgages, especially if you want to reduce the term significantly.

Also, bear in mind that you’ll be stuck with your new term. If you want more freedom and a safety net, overpaying might suit you better, as you can stop whenever you want. 

4. How remortgaging regularly reduces your mortgage interest costs

By re-mortgaging regularly and shopping around for the best deal, you can ensure you’re on the lowest rate.

The lower the rate, the easier it is to clear your debt quickly.

In our example of a 25-year £100,000 mortgage with a 5% interest rate, this deal will cost you £75,377 in interest over the term.

But with a standard variable rate (SVR) of 7% the £100,000 mortgage would cost you a whopping £112,051 in interest.

If you can find a lower rate, you could shrink your interest and save thousands compared to the SVR.

Once you have had your mortgage for a while it often becomes easier to access more competitive rates as you have more equity in your property and a track record of paying monthly, so always shop around.

5. How improving your loan-to-value (LTV) ratio lowers your mortgage rate

A low loan-to-value (LTV) ratio gives you access to more competitive mortgage rates.

LTV is the percentage of your property's value that you are borrowing.

You can lower your LTV in a few ways:

• Put down a larger deposit when you buy your house, if possible

• Overpay on your mortgage

• Have your property increase in value (this is largely out of your control, but you could consider buying in an up-and-coming area, while home improvements can also help.)

If you’ve already taken out your mortgage, your best chance of lowering your LTV is to overpay.

Most lenders have LTV thresholds that determine the deals you can access, so if you have 40% of equity in your property you will get a better rate than if you have 30% for example.

When you’re close to the threshold, see if you can overpay to dip below it before you re-mortgage.

Generally, the best deals you can access become available once your LTV drops below 60%.

6. Use an offset mortgage to reduce interest payments

An offset mortgage links your savings account to your mortgage balance, so you only pay interest on the difference between the two.

With this kind of mortgage, you’ll need to take out a mortgage and a savings account with the same lender.

Here’s how it works. Say you have a £100,000 mortgage and £50,000 in the savings account.

You only pay interest on the difference, in this case, just £50,000.

The money you save in interest can be used to pay off your mortgage quickly.

Another bonus is that you’ll have access to your savings if needed, which can be reassuring.

The downside is interest rates can be higher, so you’ll need to ensure your offsetting amount is high enough to save you money compared with having the money in the bank at a good rate.

You can learn more about what an offset mortgage is and how it works here.

7. Earn extra income with a lodger or Airbnb

Renting a room to a lodger can generate up to £7,500 a year tax-free under the government's Rent a Room scheme, money that can be used directly to overpay your mortgage.

Although it's not for everyone, getting a lodger can bring in an additional revenue stream that makes overpaying much more feasible.

If you’re not keen to have someone living with you full time, you could go down the Airbnb route to offer space in your property as a holiday let.

This option does take more work, as you’ll need to manage the listing and ensure the room is prepared for new guests, but it can be profitable.

You’ll still be eligible for the Rent a Room scheme, which is available for people running bed and breakfasts or guest houses, as long as you are renting out your main home for short periods and it is furnished If you convert your property to two separate residences with their own entrances and council tax bills you will not be eligible for the scheme.

8. Pay off your credit cards and other loans

Clearing high-interest debt such as credit cards and personal loans before overpaying your mortgage usually saves more money, because these debts typically carry higher interest rates than a mortgage.

Once you pay off those debts, you’ll have more money to overpay on your mortgage.

Of course, this option isn’t always black and white. For instance, you might have a credit card that doesn’t earn interest.

Or you may have student debt that’s racking up high interest.

In this case, because student loans are automatically wiped after a certain period, the decision on whether to overpay or not is not clear cut. It is worth considering taking advice on this first, or at least considering which is the best option for your specific circumstance.

9. Cut non-essential spending and redirect it to overpayments

If you want to live mortgage-free, something usually has to give. This may mean thinking about what you could live without.

Simply skipping a holiday could save you hundreds, if not thousands, of pounds you could put towards overpaying your mortgage.

Holidays aren’t the only luxury you could consider cutting.

If you have more than one car, could you manage with one? Could you go out less?

Couples could make a pact to skip mutual birthday and Christmas presents, saving potentially hundreds every year.

The list goes on – it’s about what you’re willing to sacrifice in return for paying off your mortgage.

Ensuring any money you have in savings is working as hard as possible and that you aren’t overpaying on bills such as broadband, energy and water will give you extra money to redirect towards your mortgage overpayment.

Learn more: how can I get a bigger mortgage?

Mortgage-free checklist

Here’s a handy checklist that brings together the key steps from this guide, so you can quickly review your options for becoming mortgage-free:

✅ Find out how many years remain on your mortgage and set a target end date

✅ Check your lender’s overpayment allowance (usually up to 10% a year)

✅ Consider whether you could get more for your money in a high-interest account than by paying off your mortgage at its current rate

✅ Build an emergency fund before committing to large overpayments

✅ Compare remortgage deals regularly to secure the lowest interest rates

✅ Track your loan-to-value (LTV) and plan overpayments to hit key thresholds

✅ Decide whether a shorter mortgage term or overpayments suit your lifestyle best

✅ Consider extra income streams (lodger, Airbnb, side hustle) to boost repayments

✅ Pay off high-interest debts before tackling your mortgage aggressively

✅ Review your plan annually with a financial adviser to stay on track

What to do once you’ve become mortgage-free

Having no mortgage to pay sounds like bliss. If you’ve tightened your belt to achieve this, then by now, you’ll probably want to treat yourself.

But there are plenty of other things you could spend the extra money on, too, such as additional pension contributions, investments, or helping your children onto the property ladder.

Want tailored advice on becoming mortgage-free? Unbiased can match you with a qualified mortgage adviser near you.