Homeowners across the UK could be saving thousands, or even tens of thousands of pounds, by implementing one straightforward strategy, according to a mortgage broker.
It’s a technique that nearly everyone with a mortgage can utilise, yet many remain either unaware of it or don’t fully grasp the potential savings available. “When we speak to people about the full impact of even small mortgage overpayments, they often look on in disbelief,” said Harry Goodliffe, director of Winchester-based HTG Mortgages.
He added: “But the savings over the lifetime of the mortgage can be significant, with even small but regular overpayments often shaving off thousands of pounds in interest payable.”
Harry explained that most lenders permitted those on popular fixed-rate mortgages to overpay up to 10% of the outstanding balance annually, though in reality the overwhelming majority of borrowers overpay considerably less than that.
He continued: “Even if you’re overpaying by just £50 or £100 a month, that can translate into serious savings over the term of the mortgage.”
View 3 ImagesYou could be mortgage-free sooner(Image: Pexels)
Harry noted that when borrowers made overpayments, most lenders would offer them the option of either reducing monthly repayments going forward or cutting the mortgage term.
He said: “One tip if you’re keen to reduce your mortgage term is to leave your mortgage payments the same if you have managed to remortgage onto a lower interest rate – because you have more equity in your property, for example.
“The beauty of this is that you’re not spending any more money a month than you were beforehand, but you are making potentially massive inroads into your mortgage balance and could be mortgage-free a few years early.”
However, Harry cautioned that those considering overpayments should always verify the maximum amount they are permitted to overpay annually with their lender.
He continued: “Lenders are more than happy for you to make overpayments, but equally interest is how they make their money, so they don’t want you to overpay too much and doing so can trigger penalties. But most borrowers will be able to find out exactly how much they can overpay each year simply by logging onto their mortgage online.”
View 3 ImagesIt can mean paying it off sooner(Image: MementoJpeg via Getty Images)
Harry further advised that prior to making overpayments, individuals should typically ensure they have a financial safety net in place to cover unexpected expenditure or loss of income.
He went on to say: “Making overpayments can be a massive boost financially, but it’s almost always wise to have an emergency cash fund in place that will cover at least three months of living expenses or a significant unexpected bill. Being financially secure today is as important as paying off your mortgage a year or two early.”