Mortgage repayment over payments can be a bit of a mystery, but committing to a few mortgage repayment extra payments might just be the smart way to navigate your mortgage.
It was pleasant to read in the last couple of years that many people had taken advantage of low interest rates and overpaid on their mortgage. By paying off what you can or even the amount you were paying when the interest rates were up and around 5 or 6% you could save yourself literally thousands of pounds in interest payments reducing your mortgage term potentially by years.
Of course there's a catch, mainly because it depends on the amount of your mortgage repayment over payments and your current mortgage interest rate.
There may now be an even better way to save you more money and knock even more years off your mortgage term. Savings rates have skyrocketed recently and it is now possible to find savings products and accounts that offer 5% interest.
The highest paying accounts are fixed-term bonds where your money is locked away for between two and five years. If this money is set aside solely for your mortgage then it won't be a problem for it to be locked safely away for a couple of years. Budget using common sense and save what you can afford.
Those that can benefit most are the borrowers who are on a low interest rate tracker mortgage or are fixed in for a long term. If you can find a savings product or account that boasts net interest at a slightly higher rate than your mortgage, then it would make sense for you to pay into your savings account as opposed to making any mortgage repayment extra payments.
why opt for over payments?
If you are one of the lucky people who took out a tracker rate mortgage in 2007 you will now be enjoying extremely low rates, however new mortgage consumers looking at a tracker mortgage will discover the rates to be higher than any savings account offering.
If you find yourself in this situation you should opt for mortgage repayment over payments if you can afford it; the mortgage will be paid and your home will be yours much sooner.
Whatever type of mortgage you have you could be in a situation where you can save more efficiently by putting the money in a savings account. If you aren't sure just what is best you should seek professional advice to ensure you are happy to proceed so there are no nasty surprises further down the line.