Save Thousands by Overpaying Your Mortgage
By overpaying on mortgage repayments, many homeowners could save double as much as they currently repay. Great news for those with mortgages as not many credit schemes allow you to double your money by repaying more than you have to each month.
This revelation comes from figures released from Charcolonline.co.uk, that show that a £10,000 overpayment can save homeowners more than £20,000 in mortgage repayments and result in the home loan being paid off three years sooner.
However, this strategy is not without its' risks, as some mortgages prevent overpayments due to their payment plan. Some plans tie the homeowner into a specific repayment structure, with heavy fees levied if you attempt to repay your mortgage earlier than expected.
Don't despare as these early redemption charges generally apply to people trying to pay off significant amounts of their mortgage, thus allowing borrowers to make inroads into their debt and make huge savings without incurring penalties.
Ray Boulger from charcolonline.co.uk, said: " Most borrowers will have the ability to overpay their mortgage without incurring any early redemption charges, and some may not be aware of this."
" The most common amount which can be overpaid, without incurring early , is ten per cent per annum, but some allow five per cent or unlimited overpayments, all of which allowa large chunk of the mortgage to be overpaid.
" However, borrowers must be aware of any conditions when overpaying as breaching any terms could result in a large penalty. My advice would be to check with your lender before making an additional payment."
Overpayments need not be as high as ten per cent in order to make a saving. Calculations show that even small repayments could still yield considerable savings.
Charcolonline estimate that overpaying by £2,500 on a £100,000 mortgage can yield savings of £4,684 and result in the loan being paid off a year earlier.
Also, overpaying does not necessarily mean the borrower no longer has access to the money they take from their loan.
" Some mortgages are fully flexible and allow overpayments to be re-borrowed. Such a facility will allow large bonuses to be parked in the mortgage, thus saving interest, untill needed for any large expenditure during the following year," Mr Boulger explained.
However, it has to be reiterated that not all mortgages allow , so the best advice would be to either check your policy allows this or ask your lender. If you are in the process of seeking a mortgage be sure to ask the lender/broker about home loans that allow overpayments without penalty charges.
If you have taken out a loan and now decide to pay it back before the loan complettion date you may be forced to pay and early redemption penalty, normally around 2 months interest. However, are these just another money making exercise to fleece you of you cash? Read on to find out more.
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