What to consider before overpaying your mortgage
December 2024
Are you thinking about paying a little bit more off your mortgage? Alongside your monthly repayments, often it’s possible to make an overpayment to reduce the overall balance you owe. This can sometimes have an effect on the amount of interest you'll pay, your mortgage term or your monthly repayments. You may also find that making one or more overpayments in the long term could free up cash for other uses too!
However, before you go ahead and start making these additional payments, it's always a good idea to consider a few things first.
The importance of independent financial advice
Review your mortgage terms
One of the first things you could do is double-check your mortgage terms to see how much you're allowed to overpay without facing early repayment charges. Lots of lenders let you make overpayments up to a certain limit (often 10% of the annual mortgage balance), but going over this limit could incur costs.
Finding out what's possible before you make your first overpayment will help make sure you're not hit with any unexpected extra charges. You can do this by contacting your lender or speak to your financial advisor.
Review your wider finances
Before you make any overpayments, it's a good idea to look at your wider finances. This could include any loans or credit card debt you may have, plus any interest rates linked to them. By checking in on what you owe, you could get a better understanding of your financial picture and your options for using any additional funds you may have .
It’s important to remember that once an overpayment on your mortgage has been paid, it cannot be withdrawn in the future. Borrowers who want to unlock funds at a later date would need to undertake a Further Advance and apply for additional borrowing, so it is wise to check you are absolutely comfortable with making an overpayment before you go ahead.
Compare savings rates with mortgage rates
Life can sometimes throw you a curveball you weren't ready to catch – like when the dishwasher breaks or the clutch goes on your car.
It can be helpful to have an emergency fund in place to act as a financial cushion to cover these unforeseen costs. Depending on your circumstances, building up this fund might be more important than making overpayments on your mortgage.
Keep future plans in mind
A wedding, a once-in-a-lifetime family holiday or a big home improvement project could call for a little bit of extra money. When planning any additional payments, it might be worth thinking about upcoming expenses or life events that could have an impact.
Overpaying your mortgage may reduce the total interest paid over time. However, it’s essential to weigh up your wider finances before you make a decision and, if you’re not sure what step to take, speak to an independent financial advisor to help you make an informed choice.
Find out more about overpaying your mortgage or give us a call on 0800 121 8899, Monday to Friday 8am-7pm or Saturday 9am-2pm.
Related articles:
The benefits of overpaying your mortgage
Ever wondered what overpaying your mortgage can do for you?
What to consider before overpaying your mortgage
December 2024
Are you thinking about paying a little bit more off your mortgage? Alongside your monthly repayments, often it’s possible to make an overpayment to reduce the overall balance you owe. This can sometimes have an effect on the amount of interest you'll pay, your mortgage term or your monthly repayments. You may also find that making one or more overpayments in the long term could free up cash for other uses too!
However, before you go ahead and start making these additional payments, it's always a good idea to consider a few things first.
The importance of independent financial advice
Review your mortgage terms
One of the first things you could do is double-check your mortgage terms to see how much you're allowed to overpay without facing early repayment charges. Lots of lenders let you make overpayments up to a certain limit (often 10% of the annual mortgage balance), but going over this limit could incur costs.
Finding out what's possible before you make your first overpayment will help make sure you're not hit with any unexpected extra charges. You can do this by contacting your lender or speak to your financial advisor.
Review your wider finances
Before you make any overpayments, it's a good idea to look at your wider finances. This could include any loans or credit card debt you may have, plus any interest rates linked to them. By checking in on what you owe, you could get a better understanding of your financial picture and your options for using any additional funds you may have .
It’s important to remember that once an overpayment on your mortgage has been paid, it cannot be withdrawn in the future. Borrowers who want to unlock funds at a later date would need to undertake a Further Advance and apply for additional borrowing, so it is wise to check you are absolutely comfortable with making an overpayment before you go ahead.
Compare savings rates with mortgage rates
Life can sometimes throw you a curveball you weren't ready to catch – like when the dishwasher breaks or the clutch goes on your car.
It can be helpful to have an emergency fund in place to act as a financial cushion to cover these unforeseen costs. Depending on your circumstances, building up this fund might be more important than making overpayments on your mortgage.
Keep future plans in mind
A wedding, a once-in-a-lifetime family holiday or a big home improvement project could call for a little bit of extra money. When planning any additional payments, it might be worth thinking about upcoming expenses or life events that could have an impact.
Overpaying your mortgage may reduce the total interest paid over time. However, it’s essential to weigh up your wider finances before you make a decision and, if you’re not sure what step to take, speak to an independent financial advisor to help you make an informed choice.
Find out more about overpaying your mortgage or give us a call on 0800 121 8899, Monday to Friday 8am-7pm or Saturday 9am-2pm.
Related articles:
The benefits of overpaying your mortgage
Ever wondered what overpaying your mortgage can do for you?
