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Did you know, for instance, that making overpayments on your mortgage can slash thousands of pounds off your interest bill? Additionally, it will cut the length of time taken to repay your home loan so you get to own your home sooner. Imagine, say, that you have a £100,000 repayment mortgage, with a 25-year term and an interest rate of 6%. Your monthly payments will be £644, and after 25 years you will have paid back a total of £193,290. In other words you will have paid back £1.93 for every pound borrowed. If, however, you were to overpay your mortgage by just £50 each month, your total payment would be reduced to £177,279 -- a saving of over sixteen grand in interest. Furthermore, this overpayment shortens the length of the mortgage by 45 months, which means almost four extra years of bliss. Its is worth being prudent though and ensuring that your will not be penalised by your lender for changing your standing order or making overpayment. In the main, most flexible mortgage lenders will allow you to make overpayments of up to 10% each year. But if your lender doesn't allow this, you have another trick up your sleeve! Lessening the term of your mortgage from 25 years to 21 years would increase your payments in exactly the same way as overpaying by £50 each month. Mind you, this is a much harsher way to do it because payments are fixed. However, it doesn't prevent you from increasing your term again, should you need to, by simply writing to your provider. At the end of the day, paying off your mortgage early is simply the best and least risky ways of saving money. Overpaying a loan charging, say, 6% a year is equivalent to earning a tax-free savings rate of 7.5% for a basic-rate taxpayer. For a higher-rate taxpayer, this risk-free and tax-free rate is equivalent to 10%, which is practically unbeatable! Many people forget that even though we sign up for a 25-year mortgage term there is no earthly reason why we have to stick to this. If you have any extra cash each month, using it against your mortgage can make a huge difference and it can save you thousands of pounds in interest each year. Good luck on removing that mortgage millstone from around your neck! Article Source: http://www.articlewheel.com
Fool.co.uk's Mortgage Comparison Centre demystifies mortgages with impartial information on mortgage products. Compare mortgages online, and find the best deal for your needs.
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