The term overpaying your mortgage refers to the voluntary additional payment of cash into your mortgage account over and above the agreed monthly sum.
There are a variety of reasons you might want to do this.
If you have no outstanding debt elsewhere (which is likely to be more expensive) and surplus net income or cash sitting in a savings account earning you little or no interest, then reducing your mortgage is a prudent option. Saving 3.85% in mortgage interest when you are only earning 2% gross interest in your best ISA might seem like a ‘no brainer’.
Alternatively, you might want to use a windfall or bonus to reduce the mortgage sum in case interest rates rise in the future, making payments hard to meet. Or perhaps you are planning a few months sabbatical and you want to take a ‘mortgage holiday’ thus making no payments whilst you aren’t earning.
We all have different priorities and financial circumstances and it’s impossible to consider whether or not you should consider making over payments without knowing more about your personal circumstances. For example, it might be prudent to keep some cash readily available for that rainy day, especially if you are self employed or currently find in a precarious state of employment!
The starting point should be to make sure that your mortgage agreement allows you to do what you are considering. Not all lenders will allow repayment holidays or over payments and some of those that do might charge significant fees for this activity, even if you only slightly exceed what may be allowed.
For more information or to speak to a mortgage adviser, contact us on 01628 507477.
Download our Free First Time Buyers Guide
Recent posts
Research from buy-to-let lender, Landbay, shows that UK landlords are looking at raising rents ahead of the Renters' Rights Bill which is due to come into force this year.
Data shows landlords could miss out on green mortgages due to expired energy performance certificates.
Buying a house is a big deal, and where you are planning to buy will make a difference financially. In this short blog, we look at the most affordable and most expensive areas and how much you need to be earning to buy in there.
Pros and Cons of Equity Release
15 days ago
Equity release is a type of mortgage that allows homeowners 55 and over to access money from their property's equity without having to leave their home. This is done by securing a loan against the house which is usually repaid by selling the property when the borrower passes away or has to move into long-term care.
Your House Viewing Checklist
16 days ago
It’s important to ask questions about the property you are interested in before taking that step to make an offer. A little probing can make all the difference between buying your dream house or something that requires a lot of work.
Half of over 60s predicted to benefit from accessing housing wealth through Equity Release
19 days ago
There are millions of homeowners over the age of 60 who are likely to release money from their homes to pay for their lifestyle during retirement giving those who are 'asset rich but cash poor' a way to live out their retirement the way they wish.
Average Age of the First Time Buyer in the UK
26 days ago
The average age of a first-time buyer in the UK is two years older than 10 years ago. This is understandable with managing the cost-of-living and challenges within the economy such as high interest rates making it difficult to get onto the property ladder.
Delayed Start Mortgage from Skipton
28 days ago
Skipton Building Society launches ‘Delayed Start’ mortgage meaning first time buyers won’t be required to make repayments for the first three months.
According to a survey by Skipton, first time buyers who bought their home in the last five years found that in the first three months of living there, they were spending upwards of £30,000.
More information
Trusted by
