Whether a First Time Buyer in Leeds, Home Mover in Leeds or looking to Remortgage in Leeds, every homeowner ought to know that overpaying, even if it is not by a lot, could make a difference in the amount of interest you pay back over your mortgage term. The sooner you start overpaying, the better the effects of your additional payments.
There have been proposals in the past, that homeowners not being able to afford these extra payments. It could just be that life is getting in the way. Of course, overpaying is the ideal thing to do when you take out a mortgage, although there is always something new and flashy, we’d rather spend the money on.
The problem seems more likely just to be remembering to overpay your mortgage. It is not something we envision comes into your mind too often either, besides maybe when your mortgage term is almost up.
So, if this sounds like you and you are maybe hoping to overpay to retire early perhaps, what should you do? Our recommendation is to 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 is 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, the payer’s standing orders get owned. Have a financial emergency and do not 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 will 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 have been overpaying for some time. It is essential to check with lenders though you are looking to do this. Otherwise, it could negatively affect your credit report.
Overpaying is a great habit to have, but it is not obligatory. If you do not feel the need to, you do not have to. That said, saving off a year or two of your mortgage term will be something you will benefit from significantly.