Our very own money saving expert, Chris Spurgeon asks why less than 50% of homeowners overpay their mortgage despite the huge benefits, and how you can be mortgage free earlier than you planned by overpaying a small amount towards your mortgage each month.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Making extra payments on your mortgage now might seem financially stressful to you, especially when you feel that the money can be put to better use elsewhere. But the savings you can make year on year on your mortgage could make you change your mind.
If you think you can’t afford to overpay – think again.
Take a serious look at your finances. Do you often order in takeaways or go out for dinner when you could be eating cheaper at home? Spend money just for the sake of it at the weekends? Pay for a subscription TV that you don’t make full use of?
If that sounds like you, it might be time for a financial overhaul. You can save a mountain of money a month by living smarter and being more frugal. And the money you save could be best spent as overpayments on your mortgage.
I’m not suggesting that you have to pay hundreds of pounds extra a month. Your mortgage agreement might have restrictions on the amount that can can overlay without a penalty. However, even just £50 – £100 a month can reap huge financial rewards in the long run.
If a homeowner were to overpay on their mortgage by around £100 a month, they could save over £5,000 and reduce their term by more than three years.
A low risk investment for your hard earned cash
Choosing between saving money each month, or placing money into investments can, to some, be a hard decision. But there’s another way to think of it. You can make your money work harder for you by paying off outstanding loans, rather than leaving it sat in a savings account. With today’s interest rates so low, you will be earning very little in interest.
Even first-time buyers on a fixed rate can overpay by an extra £100 a month and save just over £6,000 to reduce their term by over two years.
Your biggest outgoing cost, but for a shorter term
You could be placing your extra cash into what is more than likely your biggest expenditure every month – your mortgage. There’s a lower risk of you losing your money in a property than if your investments take a downward spiral and the stock markets crash unexpectedly.
The advice I give dental and medical professionals who come to me about their mortgage is that unless you have valuable investments that deliver a good return, you may as well reduce your debt and be mortgage-free quicker, all while having paid less mortgage interest along the way too.
Of course, financial climates can change and it’s really important that you get tailored personal advice before making big financial decisions.
Make better use of your disposable income
If lowering your mortgage term is something you’d like to take a look into then book an appointment with a mortgage adviser. At Dental and Medical Financial Services, we can help you with providing calculations for your overpayments, and work out how much you would be saving by overpaying, in terms of both time and money. It may be the best call you make this year.
Need help planning your mortgage overpayments?
Mortgages | Buy to Let | Property | Mortgage Planning |
Dental & Medical Financial Services have been helping doctors and dentists with finding low-cost mortgages for your home and investment properties for over 25 years. Call Chris to discuss your options.
Tel: 01403 780 770