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The ins and outs of overpayments

The first few months in a new house can sometimes be tough, financially. No doubt you’ve just worked really hard to save enough money to afford to move house, or buy for the first time, and now not only are you getting used to your new mortgage repayments and household bills, but you may also need money to redecorate and make the house your own.

But once you’ve settled into your mortgage and have gotten used to your new outgoings, you may find that you have a bit more disposable cash than you first thought. So the next questions is: what should you do with the money, spend it or save it?

You could splash out on a fancy holiday, splurge on an impromptu shopping trip, treat yourself to a new car, or you could decide that it’s better to invest it or save it for the future. But have you thought about making overpayments on your mortgage?

What are the benefits of overpaying?

There are two main incentives to overpaying on your mortgage:

  1. Pay less interest and more capital off
  2. Lower the term of your mortgage

By paying as little as £100 extra a month, you could significantly reduce the term of your mortgage. For example, if you have a £100,000 mortgage over 25 years with an interest rate of 4%, and you pay off an extra £100 a month, you could reduce your mortgage term by 6 years and save £15,534 on interest.

Just be aware that some lenders may charge an early repayment fee, so it’s worth sitting down with your mortgage adviser to see if the overpayment charge outweighs the other benefits of making overpayments.

You can make changes to your overpayments at any time, whether this is to reduce or increase them. For instance, if you get engaged and suddenly need that extra cash to save for a wedding, you can reduce your overpayments or revert back to your original mortgage payment. Similarly, if you get a promotion at work, you might decide to invest some more money in your mortgage, so you can simply call your lender and increase your payments to an amount you feel comfortable with.

Please don’t hesitate to contact us here at CAPC, if you would like any further help or guidance when it comes to managing your mortgage repayments.

 For further information call: 01789 201 914

Or email: enquiries@capc.uk.com

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