Statistics apparently show that 56% of homeowners with a mortgage never get around to overpaying. The data there is quite interesting, as mortgage applicants usually begin their mortgage journey with every intention of overpaying at some point.
Every homeowner, whether a First Time Buyer in Liverpool, Home Mover in Liverpool or going for a Remortgage in Liverpool, should know that overpaying your mortgage can make a significant difference in what you have to pay each month. The earlier you start overpaying, the quicker you can take advantage of it’s benefits.
The survey, undertaken by Compare The Market, suggests that homeowners may not always be able to afford such an option. Sometimes life gets in the way. In hindsight overpaying is a great thing to start doing, however, we always find something ‘better’ to spend our money on.
A lot of the time it might just be as simple as remembering to overpay your mortgage. After all, it’s not something that immediately comes to mind when buying a home.
So, if you’re in this situation and are looking to overpay, what should you do? We’d recommend setting up a standing order that is payable to your lender each month. Have it go out alongside all your other payments, so it’s easier to manage.
For example, say your monthly mortgage payment is £450 per month and goes out on the 2nd of each month. You are able to afford an extra £85 per month and are keen 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.
A great benefit here, is your mortgage payments will then total at £535 and because it’s going out as a regular payment, this will become a part of your monthly routine.
Another perk is that whereas a direct debit is controlled by the receiver, standing orders are controlled by the payer. Struggling for funds this month and can’t afford to overpay? Just cancel the direct debit.
Whilst it would be a shame to have to stop overpaying, you at least have the benefits you’ve gained so far. Depending on the lender, you may even be allowed to arrange reduced payments or take a “payment holiday” if you’ve been overpaying over a long period of time. It’s important to check with lenders though if you’re looking to do this, otherwise it could have an adverse affect on your credit report.
Overpaying is a great habit to have but it’s not something you have to do. If you don’t feel the need to, you don’t have to. That being said, knocking off a year or two from your mortgage term will be something definitely worth the effort.