Millions of UK households warned ‘not’ to overpay on their mortgage
![](https://investmoneyuk.com/wp-content/uploads/2024/07/0_mortgage-780x470.jpg)
The pros and cons of overpaying on your mortgage have been revealed by experts. The Sun newspaper reports by overpaying, even by as little as £1.66 a day, you could save yourself thousands of pounds in interest as you move through the stages of your life.
Chris Sykes, technical director, Private Finance, said: “Many first-time buyers are stretching their mortgage terms over three or even four decades to make the monthly mortgage payments affordable. But this has a huge effect on the amount of interest they’ll pay back over the term of their loan.
“Remember, when you remortgage you can opt to lower the term if you have the budget or if rates have reduced and can overpay in the meantime if you have the spare cash.” If you’re still on a low fixed rate of 1% or 2%, you could earn a better return on your cash by putting it in a savings account.
READ MORE HMRC checking social media pictures to see if they ‘tally’ with how much tax you pay
“If you’re allowance is 10% overpayments each year, typically this can paid daily, weekly, monthly or annually,” he said. “With the way that compounding works, where interest is added to the debt each year affecting the cost of your monthly payments, you are usually best making overpayments as soon as you can rather than saving for one big lump sum payment.”
David Hollingworth, of L&C Mortgages, said: “If you’re lucky enough to still be on a rate of around 2% make that low rate work harder for you for the remainder of your fixed rate by overpaying as much as you can afford. That way, by the time your deal expires and you have to remortgage to higher rate you’ll have a smaller mortgage balance to contend with.”
Overpayment comes with the risk of penalties if you pay back more than your overpayment allowance, too.
Source link