29 Jan

Homeowners advised to overpay on mortgages

Homeowners advised to overpay on mortgages

Homeowners whose finances have been buoyed by January bonuses or pay rises should consider overpaying on their home loan, it has been claimed.

According to Katie Tucker of John Charcol, even increasing the size of your repayment by £50 per month can bring long-term financial benefits.

She explained: "Mortgage lenders normally allow you to pay up to £500 monthly or ten per cent of the debt, and for most your interest will be recalculated immediately.

"Simply overpaying an extra £50 per month will bring a £150,000…repayment mortgage down from 25 years to 22 years, and save you a whopping £17,415 on the cost of your mortgage over the term."

Moreover, should borrowers commit more money to their mortgage in a lump sum, even greater benefits will accrue, Ms Tucker added.

"If you are lucky enough to receive a substantial lump sum as an annual bonus, paying off part of your mortgage could be a very sensible thing to do this year, because while interest rates are high, reducing your debt saves you even more on a monthly basis.

"If you reduce your £150,000, 25 year mortgage by £20,000 this January but keep your mortgage payments the same, you can pay off your mortgage six years early."

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