What are the benefits of overpaying your mortgage?

Savings interest rates are not the best, and if you have extra cash it may be a good idea to consider overpaying your mortgage as it’s an easy way to save £1,000s in interest.

Paying an extra £90 a month on a £200,000 mortgage from day one of a 25-year term would reduce the loan’s total cost by more than £16,800 and shave over three years off the term.

If you overpaid the same amount from the mortgage’s 10th anniversary you could save £5,300 in interest and pay your mortgage off 18 months early.

Overpayments are not right for everyone however, you could lose access to emergency funds and depending on your mortgage, there may be some penalties for early repayment. Typically, you can only make a 10% overpayment without incurring penalties, for example.

The money you’d save on interest however often beats the returns possible by putting it in savings, given savings rates are currently so pitiful. Even small overpayments can really make a difference.

As overpayments are not suitable for everyone, you should consider your own circumstances first and seek appropriate financial advice before proceeding.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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