Your mortgage payment is probably the biggest expenditure on your monthly budget (unless you have a very fancy car or very expensive tastes ;-)) and if you’re anything like me, you’ll often look wistfully at the amount on your bank statement and wonder what life would be like if you were mortgage free.
Or what about if you’ve had bad credit in the past and have one of those bad credit mortgages with the slightly higher interest rates. I bet you look at the amount you pay and wish you could reduce the amount owing so that you can apply for a standard mortgage once your payments have been made on time for a good length of time and your credit file is looking healthier.
One way to reduce the amount outstanding on your mortgage is to simply overpay each month – sounds like I’m stating the obvious a bit here doesn’t it? Honestly though, overpaying – even by a very small amount – will make a bigger difference than you might think.
If we take my mortgage as an example, I can overpay by £10 a month and that will knock 11 months off the mortgage period AND save me over £3000 in interest over the course of the mortgage. An extra £50 a month will cut down the length of my mortgage by 4.6 years and save me a whopping £16,000. I know you get the point but just to drive it home, a £100 extra a month will save almost 7 years and £22,000.
All of this makes me wonder why I’m only overpaying by a small amount right now and has me very tempted to call my bank and increase my standing order!
There are plenty of mortgage over payment calculators online but I used this one here to figure out how much I could save as it was the easiest one to use for me and honestly, I’d strongly recommend having a play because seeing those figures down there in black and white really makes you think.
So whether you want to pay off your mortgage as quickly as you can, save some money on interest or simply reduce the balance owing ready for when you next remortgage, overpaying could definitely be the way forward!
Obviously, I should say that I’m not a financial advisor so you don’t have to take my word for it but a quick Google should tell you all you need to know if you want to look into this a bit more before deciding if overpayments will work for you or not 😉
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Image credit: Shutterstock, flovie
