What would you do with a spare £10,000…?
- Leave it sitting in the bank for a rainy day
- Book a luxury holiday to the Bahamas
- Put down a substantial deposit on a brand new car
- Fit a brand new bathroom
Or… you could overpay the mortgage!
Take a second to think about it – a mortgage is a debt like any other, and the longer you keep it the more it costs. Overpay & you could be mortgage-free earlier!
In fact, think of overpaying your mortgage as a form of saving. For example, if you were repaying a 5% mortgage – and cleared £10,000 of it – that’s £500 a year you’d save in interest! You simply can’t get this amount back with any safe saving accounts*
Things to bear in mind –
- Watch out for ERCs (Early Repayment Charges)! You can find details of this on your annual mortgage statement….but you really don’t want to be paying them!
- Pay off your most expensive debt first! Your credit cards are likely to be costing more than your mortgage!
- Keep a healthy rainy-day fund for emergencies… three to six month’s outgoings is appropriate for most households.
- Check when interest is calculated on the account BEFORE you make an overpayment e.g. if interest is calculated annually in December there’s no point making a payment in January, as your money will have no effect on your mortgage balance for a whole year!
- Ask your mortgage company to shorten the term, NOT reduce the monthly payment. You’ll pay less overall this way.
Your property may be repossessed if you do not keep up repayments on your mortgage.
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