Whether you’re a First Time Buyer, Home Mover or going to Remortgage in Sheffield, every homeowner should know if they’re overpaying their mortgage, even if it’s not by a lot. It can make an impact on the amount of interest you pay back over your mortgage term. The earlier that you start overpaying, the greater the effects of your additional payments.
When life gets in the way, it may prove slightly difficult to afford these extra payments. That said, overpaying is sometimes a good thing to do when you take out a mortgage, but as always, there is something else we’d rather spend our money on to make us happy.
If this sounds like you and you’re maybe hoping to overpay to retire early, what we recommend you do is set up a standing order that is payable to your lender each month. Set it up to go out on the same day as your regular mortgage payments.
For example, say your monthly mortgage payment is £450 per month and goes out on the 2nd of each month. You can afford an extra £85 per month and want to put that towards your mortgage payments. Set up a standing order of £85 to go out to your lender on the 2nd of each month too.
One of the perks of this is your mortgage payments will then total at £535, and because it’s going out as a regular payment, this will feel and later become the norm for you. Another perk is that whereas the receiver controls a direct debit, standing orders get influenced by the payer. Have a financial emergency and don’t want it to go out this month? Log into your online banking and cancel the payment.
Whilst it would be a shame to have to stop overpaying, at least you’ll receive those benefits thus far. Depending on the lender, you may even be allowed to arrange reduced payments or take a “payment holiday” if you’ve been overpaying for some time. It’s essential to check with lenders, though, if you’re looking to do this, otherwise, it could negatively affect your credit report.
Choosing to overpay your mortgage is a great attitude to have, but it’s not necessary. If you don’t believe the need to, you don’t have to. That said, cutting your mortgage term by a year or two will be something you’ll benefit from significantly.