There is nothing about wanting to overpay your mortgage. The question is when you should overpay your mortgage, which is what we are going to answer here.
Mortgage payments can sometimes be high, especially when you first step onto the property ladder. Your interest rate can be quite high and you may only be able to pay your mortgage payments and have no extra money to play with.
Those of you who have that extra money can put it into your mortgage by making what is called a “mortgage overpayment.”
What is a mortgage overpayment?
A mortgage overpayment is a separate payment that you pay to your mortgage provider WHAT’S MORE of your current monthly mortgage payments.
Example: the outstanding balance on your mortgage is £ 230,000. Your mortgage provider allows you to overpay a maximum of 10% per annum. This means that the maximum you can overpay on your mortgage is £ 23,000 for that year.
Some providers allow a maximum overpayment in a year as an amount and some may have a percentage limit. This fixed amount is usually free or paid, but some providers may charge you for overpaying. Always check the fine print before making a decision and, if possible, consult a financial advisor.
Can I make an overpayment?
This comes down completely to who your mortgage is with and whether they offer mortgage on payments.
I would recommend speaking with them on the phone or in person if possible. That way, you know that you can ask any question as it comes to mind, which will put you at ease in that moment. Also, if you have a financial advisor, talk to him. They will be able to quickly find the answer for you.
What happens if you don’t overpay your mortgage?
Frankly, nothing happens. If you’re comfortable with just paying your monthly mortgage payments with nothing extra, go ahead. There should be no obligation to overpay your mortgage.
Always, always pay your mortgage payments on time; otherwise, you risk having your home repossessed.
When Should You Overpay Your Mortgage?
If you can overpay, go ahead.
Most people say that if you can get a higher interest rate with savings, then put your money in savings. BUT if your mortgage rate is higher than the interest rate on your savings, then overpay your mortgage.
The reason for this is when you overpay on your mortgage, 100% of the overpayment goes to your home loan and not to interest. Therefore, when your mortgage rate is higher, paying off the loan principal means that you will pay less interest in the long term.
Overpayment calculators
Take a look at some of these payment calculators where you can figure out how much you could overpay on your mortgage. That way, you can determine if you can pay it off first and when it will benefit you in the long run.
- Halifax
- On a national scale
- Santander
- Natwest
- HSBC
- RBS
If something is not right in this article, please contact us and we will fix it.
–
