Overpay your mortgage to cut thousands off the cost of your home

If you overpay your mortgage every month you could knock years off your repayment period and save thousands on the cost of your home.

Overpay your mortgage and you could get it for even less.

Many of us dream of the day we are free of our mortgage. But have you ever considered cutting the time it takes to be mortgage-free by increasing your repayments? The repayment your lender tells you about is the minimum you have to repay each month. Most of us never consider paying more, but doing so could shave thousands off the cost of your home.

“Overpaying can wipe years off your mortgage and saves you paying the interest you would have accrued by having the debt for longer,” Rosita Janulion, a mortgage expert from Habito, told the Daily Express. If someone with a £200,000, 25-year mortgage paying 1.89% interest overpaid by £100 a month, they’d “save over £7,000 in interest alone and become mortgage-free three years and three months earlier”. Anyone can overpay on their mortgage, but there may be a limit on how much extra you can pay. If you are in a deal for a set period – a three-year fixed rate, for instance – you can usually only overpay a maximum of 10% of your remaining mortgage balance each year.

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If you go beyond that you could trigger an early repayment charge that negates the benefit of overpaying. Anyone who isn’t in a fixed period may be able to overpay by as much as they like, but in that case you should also look at whether you can cut your costs by remortgaging onto a lower interest rate as you are likely to be on an expensive standard variable rate.

A different approach

Overpaying your mortgage doesn’t have to mean increasing your monthly payments. If you are due to remortgage you could move your home loan to a lower interest rate, but keep your repayments the same. Martin Lewis of Moneysavingexpert.com gives the example of someone who paid off their mortgage nine years early and saved around £54,000 by remortgaging to a lower interest rate, but not reducing monthly repayments.

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For example, if you had a £200,000, 25-year mortgage with a 3.5% interest rate your monthly repayments would be £1,002. Remortgage to a 2% interest rate and your minimum repayment would drop to £848 a month. By keeping yours at £1,002 you could shave four years and nine months off your mortgage term and save £10,937 in interest.

Another option could be to sign up to new website Acceleratemymortgage.com. It works like a cash-back website, but your earnings are used for your mortgage. “You search it for a retailer and if you click through and buy something, you earn a percentage of the spend... as an overpayment to a mortgage lender,” says John Fitzsimons in The Sunday Times. Before you sign up and start spending, make sure your mortgage lender works with Acceleratemymortgage.com. Also check whether it has a minimum overpayment amount.




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