Could mortgage overpayments be right for you?


Many of us have the aim of becoming mortgage free. Clearing your mortgage debt more quickly can save money on interest payments in the long run, but is it the right option for you?


What is an overpayment?

Making mortgage overpayments means paying more towards your mortgage than the original amount that was set by your lender.


There are two ways of overpaying;

  1. As a one-off / ad-hoc lump sum.

  2. By regular overpayments; either through increasing your monthly payments by a certain amount or setting up a separate payment arrangement such as a standing order. Regular monthly overpayments can be flexible and you can choose if you pay them or not. Of course, you must continue to pay your original monthly payment.


You can also overpay with a mixture of the two methods above. When you make a one off payment you’ll often have the choice to either reduce your mortgage term, potentially saving hundreds of pounds in interest over the long-term, or reducing your monthly payments if you’d rather reduce your monthly outgoings. Keeping to your existing monthly payment means you’ll become mortgage free sooner.



Can I make mortgage overpayments?

If you’re considering making overpayments, you need to check if your lender allows this. Some lenders have restrictions on overpayments, for example only being allowed to pay 10% of your outstanding mortgage each year without incurring a fee. Some lenders charge fees if you overpay on your mortgage so making overpayments can be counterproductive. When you take out your mortgage, your adviser is likely to ask if you’d like them to look specifically at mortgage products which allow overpayments.

If you’re unsure as to whether you are able to make overpayments on your mortgage you can always check your formal mortgage offer or ask one of the team to check for you.


Can I afford it?

Overpayments on your mortgage are a great way to move towards reducing or clearing your mortgage. However they might not be the right choice for you, as it may be a better choice for you to focus on other debts with higher interest rates or creating a savings cushion.

Take a careful look at your current financial position before making any overpayments, or even get in touch with a financial adviser to make the most of your money.




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