Homeowners can slash thousands of pounds off their mortgages by increasing their monthly payments slightly, an expert has said.
Karen Noye, mortgage expert at Quilter told the Daily Express: “Many mortgage products will allow you to make overpayments, which can greatly impact not only the amount of interest you pay over the course of your mortgage, but it can also help reduce the length of your mortgage term too.
Depending on the lender, people can usually overpay up to 10% of the value of their mortgage each year.
However, Ms Noye pointed out: “You must be wary of any charges for early repayments, so you should speak to your lender first and, where possible, seek professional financial advice to make sure you are making the right decisions based on your personal and financial circumstances.
“A financial planner can also help ensure you find the best mortgage product for you, including making sure you have the flexibility to overpay should you wish to.”
Explaining how mortgage overpayments can be beneficial, Ms Noye said: “Even small monthly overpayments can save you a significant amount of money in the longer term.
“If you were to purchase the average UK house worth £292,000 with a loan to value of 90%, or in other words a 10% deposit, with a 25 years term and on a mortgage rate of 5.49%, your total repayment would be £483,660.
“However, if you made a £100 per month overpayment it would save you £29,300 in the long run, reducing your total repayment amount to £454,360, and you could also pay off your mortgage two years and 10 months earlier.”
According to Ms Noye, those who could afford to increase this to a £200 per month overpayment could save £51,330 and reduce the total repayment to £432,340. It would also potentially help them paying off their mortgage five years and one month earlier.
An overpayment mortgage calculator can provide the relevant calculations for individual circumstances.
However, it’s important to note that while mortgage overpayments can offer substantial savings, they may not be the best option for everyone.
Ms Noye noted: “While overpaying on your mortgage can lead to a big saving in the long run, it is important to consider your overall financial position before you start making overpayments.
“You should ensure that you have a good emergency cash buffer built up and that you have paid down any high interest debts first.”
