April 9th, 2014. Ben Lloyd
Business is Booming: Can I Pay off My Mortgage Early?
Is business going great at the moment? Well, if you have a lot of cash in the business bank account you may be considering paying off your commercial mortgage early. But does this make financial sense?
Here is everything you need to know about early repayments:
Should I Repay Early?
Whether you should repay your mortgage early or not will be determined by the financial situation your business is in. Is your income solid? You don’t want to repay your mortgage and then suffer financial problems. And what are interest rates like at the moment? If they have risen you may be better off investing and continuing to pay low rates on your mortgage.
One important thing to do before considering paying off a commercial mortgage early is to pay off any other business debts you may have. Debts from credit cards, overdrafts or rented equipment will often have higher interest rates attached to them and if you are currently paying off a minimum amount each month you may have the loan for many years or even decades!
How much is your business bank account and savings earning in interest? Balance out your mortgage rate and what you are receiving on your savings. If your mortgage is higher you will save more money paying it off than you would in interest.
In most cases paying off your debt and mortgage will free up cash and make your business more profitable in the long run. This is a great option if you have a large amount of money sitting around without a use or you are uncomfortable investing in other methods such as stocks and shares. Plus there are the added benefits of added equity in your business premises and peace of mind that there is one less thing to worry about.
How Should I Repay?
The ideal way to repay your commercial mortgage early is to shorten the term of the loan and to make overpayments.
The shorter the mortgage term the less interest you will end up paying. This does however mean higher monthly repayments. A small increase each month will keep your finances comfortable and you may end up paying off your commercial mortgage months or even years early.
Overpayments can be done by paying an additional amount to the regular agreed fee. This will be done on the same direct debit, or if you have the cash, then as a lump sum. Be aware however that if you want to pay off a large chunk of your commercial mortgage there may be a limit. Check this out.
Most mortgage lenders will allow you to repay early however this may come with an early repayment charge. You may be able to get around this by re-mortgaging and paying off your commercial mortgage early with a new lender.
So, can you pay off your mortgage early? Yes, but whether you do so is up to you. If you need more advice on this or you want to discuss your situation, get in contact today.
Article By Ben Lloyd
April 9th, 2014
Ben is the Director and Co-Founder of the Pure Group and Managing Director of Pure Property Finance.
Following a career in Barclays, where Ben was in the real estate finance team for 8 years, he decided that the market needed a more forward-thinking type of commercial brokerage so founded Pure Commercial Finance (now Pure Property Finance), the first company within the Pure Group.
Ben has extensive experience across the real estate sector and has participated in over £2bn of real estate transactions during the course of his career.
Ben oversees the general strategy at Pure Group and works with the senior leadership team to drive the Group forward. Ben is also on the Executive Committee of FIBA.See more articles by Ben