If you are looking pay off your mortgage and have disposable income to spare, even the smallest extra monthly payment could take years off your term.
Let’s take a £100,000 mortgage for example, taken out on a 25 year term at an interest rate of 3.5%, which would cost the borrower £500.62 per month.
By repaying just £50 a month on top of the standard monthly payment, you will reduce your term by three and a half years. Repaying an extra £100 per month will take six years off your mortgage!
The key question you need to answer when deciding whether to overpay your mortgage is whether it is a better investment for your earnings and savings.
Interest rates gained from putting your money in the bank are often considerably less than the rate of your mortgage – and the interest received is often taxable too – meaning it makes more financial sense to overpay where possible.
“Your home may be repossessed if you do not keep up repayments on your mortgage.”