Should I be looking to overpay on a mortgage?
Overpaying on a mortgage can be an excellent way to save you money on the interest that you pay on your mortgage repayments. The only problem is finding a lender that permits it. Read on to find out more!
Overpaying on a mortgage can be a great way to save you money and also pay off your mortgage much quicker than you may have originally anticipated. This can either be done by overpaying regularly on your monthly repayment amount or paying it in one large lump sum. The problem is that lenders prefer you not to do this as it means that if you overpay and repay your mortgage several years faster then they will lose out on interest. So, let’s take a look at what lender may be willing to let you overpay on a mortgage!
How much can you normally overpay on a mortgage?
When you’re overpaying on a mortgage most lenders will set a cap on how much you can overpay (if at all) before they hit you with an early repayment charge. This is basically a charge that lenders will put on you to compensate for the amount that they have lost in interest. Generally, this amounts to around 10% of your remaining mortgage balance per annum. But like most things mortgage related this is going to vary depending on what lender you have.
What we recommend that you do is speak to your mortgage lender and try to work out what the limits are that they set on overpaying. After all, if their early repayment charge is big enough it might completely outweigh the bonuses of overpaying at all! So, make sure that you do your research. It can go a long way to working out whether your overpayments will be worthwhile!
How does overpaying on your mortgage work?
Luckily for you, if you want to make an overpayment on your mortgage it’s pretty easy. We recommend you contact your lender and tell them that it’s something you wish to do. After this, we recommend that you check the limits that they set so that you can avoid any potential early repayment charges.
Will my lender allow me to make overpayments?
Unfortunately, if your lender doesn’t allow you to make overpayments at all then we’ll need to look at other options! In this scenario we recommend that you look to put your extra cash into a savings account. This means that you’ll retain all the money that you would have wanted to use on an overpayment deal and this can be used for loads of different things. For example, it can come in very handy if you need to immediately cover any expenses that pop up out of the blue!
Figuring it out
There’s loads of free online mortgage overpayment calculators you can utilise to see if overpaying on your mortgage is cost effective and if it’s even possible to overpay your mortgage.
At Mortgages Online we can provide you with all the right advice to help the process of you overpaying on a mortgage much simpler. All you need to do is get in touch with us or check out some of the articles on our website! We have loads of information on fixed rates, first time buyers and more! Visit our Articles section for more information.