Mortgages get cheaper with overpayments

Overpaying by even a small amount could slash years – and thousands of pounds – off mortgages

Homeowners who overpay mortgages, even by a small amount, can slash years off their mortgage and save thousands of pounds in interest charges.

The Daily Telegraph has published an investigation into the effects of paying more than your mortgage provider asks for – and the results make fascinating reading.

Staying in could knock thousands off mortgages

The Telegraph gives an example of a family with a 25-year £100,000 repayment mortgage. If they could sacrifice £50 a month – a couple of nights in the pub for many families – and add it to their mortgage payments each month, they would cut more than four years off their mortgage term and save a huge £24,000 in interest.

The newspaper adds, “Topping up their monthly mortgage payments by £100 would see the loan cleared six years and 10 months earlier, and cut more than £39,600 from the interest bill.”

Self-employment could mean mortgages bonus

People in jobs where they earn bonuses and people in self-employment might be able to pay in occasional lump sums to get their mortgages paid off sooner.

The Telegraph says that if you paid a one-off £5,000 extra from the £100,000 mortgage above, you would cut two years and nine months from your mortgage term, and save £25,323 in interest – although anyone planning to use a bonus or other windfall in this way should check their mortgage provider’s rules before doing so.

Check your mortgage’s rules before overpaying

Some mortgages only allow overpayments of £500 each month – so you would be better off putting the money in a savings account and making ten overpayments of £500 each. In a good savings account you could have up to £250 in interest left over afterwards.

The newspaper also advises that “borrowers with debts which are more expensive than their mortgage should focus on these. Credit cards, personal loans, store cards and overdrafts all charge higher interest than mortgages.”

But if these are clear, then overpaying mortgages can mean taking big steps towards financial freedom.

Homebank can meet your mortgage needs

Homeowners may be able to make their mortgages cheaper straight away by talking to Homebank.

Homebank have only the best mortgage consultants, ready to advise you with all your mortgage and insurance needs.

For informative and astute bad credit loan advice, call us to arrange a no-obligation appointment to suit you. Homebank are the ‘people’s mortgage broker’, with more than 3,500 mortgage products to choose from – including products not readily available on the high street.

Homebank’s experienced consultants can find the best product for you. Call Homebank now – free – on 0800 052 3604.