By how much can I overpay my mortgage?

Thanks to record low interest rates, there has been much talk in the media recently about whether or not homeowners should be overpaying their mortgage.

In many cases, overpaying your mortgage might be a good idea but in some cases it may not – for instance if you have not got a savings pot in case of emergencies or if you can get a better interest rate by putting your money in the bank.

However, if you have decided that you want to make overpayments on your mortgage – whether that is a single lump sum overpayment or a regular monthly overpayment – then it is important to understand by how much you can overpay in order to avoid breaking the terms of your mortgage.

In the majority of cases, most mortgage lenders will limit the amount by which you can overpay to 10 per cent. Others, such as many Nationwide Building Society mortgages, may give you a fixed amount of £500 or so. Some flexible or offset mortgages may have no limit.

Even if you know that your mortgage lender has a standard overpayment policy of 10 per cent for example, you should always be careful to check the terms and conditions of your own mortgage with the lender.

Any delegates on CeMAP training courses, usually training to become a mortgage advisor, will be shown how such overpayments work and the effect they can have. The effect of making overpayments on your mortgage can be huge – you could save years of payments and thousands of pounds of interest, but you need to ensure that you can afford to do so, as in many cases once an overpayment has been made you cannot easily get access to that money again. A reputable mortgage advisor will advise you of the terms of any mortgage you may be considering.



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