If you’ve ever wondered whether it’s worth making overpayments on your mortgage, then new research1 could help you decide.
The data shows the benefits of a monthly £10 overpayment with interest rates at their current low level and illustrates that even modest overpayments can make a difference to the day when borrowers become mortgage free.
If a borrower took out a £200,000 mortgage over a 25-year term, they could save £1,146 in interest (based on current rates) and become mortgage-free four months earlier. By making a £100 overpayment each month on a £200,000 mortgage, a borrower could save £9,948 in interest and reduce their mortgage term by three years in the process.
Those with a £500,000 mortgage, making the same £100 overpayment, could save over £10,000 in interest and become mortgage-free one year and five months earlier.
Don’t forget to save too
Whilst these figures show that modest levels of overpayment can prove effective, it’s important to remember to keep some savings aside for rainy day events such as unexpected bills and expenses.
As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.