With economic uncertainty and mortgage rates continuously on the rise at the moment, there has been much talk about mortgage overpayments and if it’s worth it in the long run.
It’s always worth getting financial advice from the professionals of course, and there are a number of reasons why it might worth paying extra if at all possible.
Why should I overpay?
Quite simply, to save you money in the long run. If you are a homeowner with extra cash, then not only will it lower the amount of mortgage interest you pay, but you will pay off the mortgage faster.
While the market is uncertain at the moment, the more you pay off, the more equity you will have in the property, which when it comes to sell, will be extremely beneficial for you, given the best mortgage deals tend to be available to owners with larger equity. You may have heard of LTV, which is loan to value and typically the lower your loan to value, the better mortgage rate you will achieve. For example, if your mortgage loan is 65% of the value of your property, you will get a better rate than if it is 85%.
Things to consider
It’s worth looking at your current terms as many lenders will allow you to pay as much as 10% of your balance without any extra fees. More than this and you face paying an early repayment charge. If you wanted to pay off a larger sum, it would be better to wait until you need to renew your mortgage deal and pay off a lump sum then.
Alternatively, speak to your mortgage lender and perhaps agree a set amount each month to pay off on top of your regular payments.
Given the current rates it will also likely be more beneficial for you to pay off more of your mortgage than keeping money in a savings account and the return you’ll get from that.
You could be one step closer to the freedom of being mortgage free and not having that pesky payment every month!
Whatever you decide to do, make sure you speak with your lender or mortgage advisor – and if you need any further guidance, please do contact our team and we can always put in you touch with our trusted partners.
