With so many people still paying off their mortgages as they enter retirement, it makes sense for home owners to overpay and clear their mortgage debt years earlier than expected. Paying just a small amount extra, either each month or as a one off payment, can reduce the term of a mortgage and save thousands in interest.
The cost of a mortgage is now at its lowest, and could fall further still as lenders start to pass on the benefits of the recent reduction in the Bank of England base rate. If you are on a tracker rate mortgage or a variable rate, you should see monthly repayments fall.
However, rather than use this saving for something else, use it to make overpayments on your mortgage each month. According to a recent study by CompareThehttps://www.beaconfinancialtraining.co.uk/wp-content/uploads/2020/06/cemap-online-and-classroom-training-uk.jpget.com, it is possible to save more than £1,800 by making regular overpayments.
If you overpay 10% every month on an average mortgage of £94,686 which has 14 years left on the term, you would pay an extra £59 a month but would save £1,842 in interest and the term would be reduced by 16 months.
Borrowers who have borrowed more over a longer term can make even larger savings if they regularly overpay 10%. Borrowers must check with their lender, as some may charge penalties for overpaying. If you intend to overpay your mortgage, speak to your CeMAP qualified mortgage adviser when you are looking for a new deal.