29
Jan
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."
