Want to save cash and be mortgage free quicker? Overpaying could be the answer.
But how much money are you actually going to save by doing this? And will it really knock months – or even years – off the length of your mortgage?
Well, as long as your lender allows you to, it’s likely that overpaying even by a small amount each month will save you in the long run. By using our mortgage overpayment calculator, you can find out just how much!
We’ll do the maths for you
By using our mortgage overpayment calculator here, you can find out just how much you’ll save in interest by making larger payments. Alongside this, it’ll let you know how much sooner you’ll be mortgage free than if you carry on paying what you are now.
Whether you’re looking to make a one-off lump sum payment, or you’re hoping to overpay by an extra few quid each month, you can see how it’ll affect your mortgage over time.
Plus, you’ll get to see a timeline of how much you’ll have paid off each year if you carry on paying what you are now, compared to if you overpay.
You’ll just have to fill in how much your mortgage is, how long you’ve taken it out over and the APR you’re paying. Then, you can fill in how much you can afford to overpay by. You might find there’s a hefty saving to be made.
Here’s an example: Say your mortgage is for £100,000 and it’s over a 25-year term. You’re being charged an APR of 4% - so your current monthly payment is around £528.
By paying an extra £72 a month – so your payment’s now a rounded £600 – you could save over £12,000 in interest and shave nearly five years off your mortgage.
Of course, the exact amount can change, as you may remortgage in that time and have a new interest rate. It’s also wise to remember that some lenders may charge you for overpaying by a certain amount, and this calculator doesn’t take that into account.
Check the terms
Remember, each lender may have different rules around overpaying in their terms and conditions, so it’s important to check with them before you start paying more.
Most lenders do allow you to overpay, but there may be limits on how much you can overpay by.
This can often be around 10% of your mortgage balance every year, but others may allow you to overpay by more.
It’s important that you speak to them first to find this out. Your lender may charge you if you overpay by a certain amount, which might mean you end up losing more money than you save.
Make sure to read through your mortgage contract first. Or, get in touch with your mortgage lender and ask them what their policy on overpayments is.
Disclaimer: All information and links are correct at the time of publishing.