Step 4: Think about Overpaying

 

Many people don't realise the effect overpayments can have on their mortgage.

Is it something you can start doing?

 

Why should I overpay and what are the benefits?

 

Put simply, overpaying on your mortgage will reduce the mortgage balance which means you pay less interest. BUT... this will also affect your LTV% by reducing it! So, when it it comes to re-mortgaging, you could get a better deal and further lower your payments.

 

It's important to know how much your current lender will allow you to overpay by so you don't incur any charges for going over. Generally, most lenders allow over-payments of 10%.

 

When completing your budget planner, you might be lucky enough to have some disposable income left.

Should you save it or use it to overpay? Ideally, you'd do both. It's wise to save for those rainy days and holidays but, as we've discussed, it's equally wise to overpay on your mortgage. Not all savings accounts offer a competitive interest rate, so instead of making little interest on your savings, you could invest it back into your property.

The reasons, remember, are above. Your future self will thank you!