Reside Mortgages

Should I overpay on my mortgage?

If you can afford to do so then it’s definitely worth considering. But whether or not to overpay on your mortgage depends on your individual financial circumstances and goals!  

Some food for thought:

 

Interest rate: If the interest rate on your mortgage is high, you may benefit from making overpayments to reduce the overall amount of interest you will pay over the life of the loan and in turn reduce the capital balance sooner.

 

Savings: If you have a significant amount of savings, you may want to consider using some of those savings to make overpayments on your mortgage. This can reduce the overall interest you’ll pay and help you become mortgage-free sooner.

 

Debts: If you have other high interest debts, such as credit card balances or personal loans, you may want to focus on paying those down first before making overpayments on your mortgage.

 

Future plans: If you have other financial goals, such as saving for retirement or a child’s education, you may want to consider whether making overpayments on your mortgage is the best use of your money.

 

Early repayment charges: Check with your broker to see if there are any early repayment charges associated with your mortgage. Most mortgages allow for at least a 10% overpayment facility each year but some can carry certain restrictions, so may not be worth it if it’ll cost you to do so!

 

As a very basic example, if your mortgage is £250,000 and you have a fixed interest rate of 4.85% for 30 years then even by paying an extra £100 per month, you’ll be looking at around a £36,994 saving on interest and paying that mortgage back 4 years and 3 months earlier!

 

The MSE has a great free overpayment calculator to illustrate things nicely.

Ultimately, the decision to overpay on your mortgage depends on your individual financial situation and goals. It may be beneficial in some cases, but it’s important to carefully weigh the pros and cons before making a decision. 

Get in touch if you have any questions. 

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