With outgoings on holidays and commuting slashed during the pandemic, some families have been able to save far more than in ‘normal times.’ A good way to use these extra savings could be to overpay on your mortgage.
Why overpay?
In a low-rate environment, savings rates are probably going to be lower than your mortgage rate, which means overpayments are likely to save you more in interest payments than you could earn in deposit savings. Even small mortgage overpayments could result in a significant saving in interest payable. Overpaying also has the added benefit of reducing your mortgage term.
Things to think about
Before overpaying though, it’s important to check your mortgage terms and make sure you have a financial safety net. Some questions to ask yourself include:
• Will I be able to cover outgoings should my circumstances suddenly change?
• Am I saving enough for other long-term plans, such as retirement?
• Does my mortgage have any charges for overpaying?
• Do I have other debts, such as credit cards or loans? (These are likely to have a higher interest rate).
One size doesn’t fit all
Although it often makes financial sense to overpay on your mortgage, this option won’t be right for everyone. We can help you understand your mortgage options.
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