Hardly a day goes by without the cost of living hitting the headlines. For many homeowners the increasing costs of owning and running a home is having a huge impact on household budgets.
For those borrowers with a fixed rate mortgage, the recent increase in mortgage interest rates may not have an immediate impact. However, as mortgages are more expensive now than they were two years ago, you may see your mortgage payments rise when you next come to remortgage.
Overpaying on your mortgage now could save you more on interest down the line and help reduce your mortgage payments. It could also make sense to overpay on your mortgage rather than keep your money in a savings account, because you’ll earn more in interest savings on your mortgage than you could earn in some typical savings account.
An overpayment is any additional payment you make over your usual monthly mortgage payment. Overpayments can either be a one-off lump sum or a regular overpayment made throughout the year. Overpaying on your mortgage means you can potentially clear your mortgage balance quicker.
Lenders will offer you better rates if you have a lower loan to value. The more you can pay to reduce your mortgage, the potentially lower interest rates you’ll have when you come to remortgage to a new deal.
Overpaying on your mortgage might not be right for everyone. Using savings to overpay on your mortgage could leave you with less cash to fall back on in an emergency.
Speak to your lender – not all lenders have the same rules for overpaying and there may be a penalty fee called an Early Repayment Charge if you overpay too much.
You should only make overpayments if you’re sure you can afford them. It’s a good idea to make overpayments if you already have an emergency fund, and you don’t have any other, more pressing debts that need to be repaid.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE