For some Covid-19 has been a time of saving and if you have been not spending and find you have some spare cash Enable’s experienced IFA in Bishops Stortford can help you look at reducing your mortgage. With savings rates at an all-time low overpaying on your mortgage could be a bit of a no-brainer at the moment.
But as with many money matters the devils in the detail. There can still be some negatives on overpaying your mortgage that will depend on the conditions of your original mortgage deal. In some cases, there could be repayment penalties or the loss of an emergency fund. But if you get it right and overpaying your mortgage it can be a real boost to your finances, because you’ll be bringing down the debt you’ve built up and paying it off quicker. You don’t usually pay interest on any of the amount you overpay. And given that savings rates are so historically low at the moment the money you’d save on interest is bound to beat any return you could get on any savings accounts.
Fees for overpaying your mortgage are typically between 1% and 5% of the amount overpaid, though the fee you pay usually decreases the closer you are to the end of the fixed or discount period. Most lenders will allow you to pay 10% of your mortgage balance as an overpayment per year if you’re still in your introductory fixed, tracker or discount period. If you’re beyond that intro deal and paying your lender’s standard variable rate (SVR), you can usually overpay by as much as you want. But many SVRs are expensive, so if on one it’s best to check if you can save by remortgaging rather than only overpaying.
This is where Enable’s IFAs can help you look for a better mortgage deal that will allow you to pay down your mortgage and help you use your money wisely in these challenging times.