You could be a First-Time Buyer in Leicester looking to get onto the property ladder, a Home Mover in Manchester or a homeowner at the end of your term, looking to Remortgage for Home Improvements. In any of these cases, overpaying, even by a small amount, can be incredibly useful when it comes to the amount on the interest you pay back over your mortgage term. The earlier you begin to overpay on your mortgage, the better the effects it will have.
Some homeowners prefer not to do this, some cannot afford to. Quite often though, it will come down to life just getting in the way. Regardless of the circumstances, overpaying is definitely a good habit to get into when you take out a mortgage, but in reality, there’s always something else we’d rather buy, as opposed to making an extra payment on our monthly mortgage.
Part of the dilemma here is remembering to make those extra payments. It’s unlikely to cross your mind too often, except perhaps when your mortgage only has a few years left to run.
So, if you can see something of yourself in the above and would like to be making those extra payments so that, perhaps you can retire a year or two early, then what should you do?
It’s highly recommended setting up a standing order payable to your lender each month. Set up the standing order to go out on the same day as your regular mortgage payment. E.g. your mortgage payment is, say £500pm and is collected on the 1st of the month. You can afford to pay an extra £75pm, so set up a standing order for £75pm to go out of your bank also on the 1st
The reason for the above is that very quickly you will start to “feel” that your mortgage is £575pm and you will get used to that within a matter of months.
The big advantage of setting up a standing order to a direct debit, is you (the payer) are completely in control, unlike a direct debit where this is the receiver.
Therefore, if you find yourself a little tight with money for one month. You can easily log in to your online banking and pause the standing order so that it would cancel any future payments from going out until reactivated.
Up until the point of stopping the payments, at least you have benefited from the additional payments made until that point, and as mentioned above, this does not stop you from reactivating your standing order in the future when you are more financially comfortable.
Some mortgages will even let you make reduced payments or take a Mortgage Payment Holiday in Leicester if you have been overpaying for a while. Before choosing a payment break though it’s essential to check with your lender that you are eligible to do so to avoid a bad mark on your credit report.
Whether a First-Time Buyer or going for a Remortgage in Leicester, overpaying your mortgage is a great habit to get into. You don’t need to go hell for leather at it unless you feel so obliged but even shaving a year or two off will be very welcome when you near the end of the term.