A look at Mortgage Overpayments and how they can help save you money!
Mortgage Overpayments is the term used when borrowers make additional capital payments to their mortgage account, that are over and above the minimum contractual repayment.
"I found your staff to be professional and friendly, and wouldn't hesitate to recommend to friends and family."
Mr & Mrs T., Somercotes, Derbyshire
Here we take a closer look at Mortgage Overpayments and how making an overpayment on your mortgage can help save you money, and pay off your mortgage earlier. We also offer details of how we can help arrange a mortgage that will allow you to make overpayments!
Table of Contents:
What are Mortgage Overpayments?
So, Mortgage Overpayments is the term used when borrowers choose to make additional regular, or occasional capital payments to their mortgage account, that are over and above the minimum contractual repayment.
Why make Overpayments on your Mortgage?
By making overpayments to your mortgage above and beyond the minimum contractual instalment, you will benefit in two ways:
- you will repay your mortgage early, and
- you will pay less interest.
You may find it interesting, or even astonishing, to note that:
- At a mortgage rate of 7% your monthly instalment on a capital repayment mortgage of £100,000 would be approximately £708 over a 25-year term.
- However, if you were in a position to pay an extra £300 a month, you would complete your mortgage in just 12.5 years, that is half the time, and would pay over £61,000 less in interest charges.
- But if you're able to pay double the repayment, i.e. £1,416 each month, you would complete your mortgage in just over 7.5 years (that's 17.5 years early!), and would have saved over £84,000 in interest payments!!
Points to check before making mortgage overpayments...
Before rushing off and making your mortgage overpayments, you must carefully take the following aspects into account:
- Most lenders will permit overpayments to one degree or another, possibly restricted to a percentage of your mortgage (e.g. up to 10% of your mortgage balance annually), or as a maximum sum (e.g. a maximum of £5,000 per annum).
- Accordingly, it is important that you check your mortgage contract to see whether you might be penalised for making such additional payments. Penalties for making overpayments can often arise during the course of a preferential rate period, for example during a fixed-rate period.
- Overpayments will usually be either regular or occasional in nature. For instance, setting up an additional bankers order to repay an extra £50 each month in addition to your normal mortgage instalment, or occasionally making an additional one-off payment such as an annual bonus or dividend, etc.
- Check to see how interest is calculated on your mortgage. Most lenders these days charge their interest either daily or monthly. Be careful if your account is operated on an annual basis - if it is, check to see the minimum overpayment that will be treated as a capital reduction (e.g. £1,000, £5,000 etc.). You may find it more beneficial to open a deposit account to save your overpayments up until you have reached this minimum figure, or wait until shortly before the lender's financial year end, and then pay it into your mortgage account. Your interest for the new year is calculated on your closing balance of the old year.
Can Shire Direct provide me with a mortgage that will allow me to make Overpayments?
We certainly can!
There are a wide variety of lenders these days that provide the flexibility of being able to make overpayments on your mortgage.
Our qualified mortgage advisors are available to discuss the options open to you seven days a week. Naturally, we'll carefully assess your circumstances, needs, requirements and aspirations and come up with the most appropriate solution for you. It could be that you would not only like a combination of the ability to make overpayments, but also one or more of the following features too:
- Underpayments
- Repayment Holidays
- Drawdown of previous overpayments
- Initial Fixed-rate period
- No Early Repayment Charges (ERC's) on your overpayments
So, please don't hesitate to Contact Us if you would like to discuss your requirements, naturally without obligation! We believe you'll find our service to be friendly, yet professional, helpful and not the slightest bit judgemental, but don't just take our word for it, why not read what some of our previous customers have had to say!
Our advisors are available on Freephone 08000 282 281 until 10.00pm everyday, and will be delighted to provide you with an in-principle decision, whatever your circumstances. Alternatively, why not enquire online, it's quick and it's easy, and we'd love to hear from you!
Hopefully we've managed to explain how mortgage overpayments work, the benefits they can have, and the things to take into account before making them. There is a wealth of additional mortgage related information throughout our website which we hope you will find useful, so why not make a cuppa, and take some time out to explore some of the possibilities open to you, and don't forget we're only ever a free telephone call or couple of mouse clicks away!
The overall cost for comparison is 9.8% APR.
The actual rate available will depend upon your circumstances. Ask for a personalised illustration. APR variable and based on a usual case. Most customers are likely to receive a lower rate or the same rate as our overall cost for comparison rate - learn more about APR.
There are no upfront broker fees.
However, a fee may be charged on successful completion. An indication is that on conforming cases (straightforward applications with no or minimal adverse credit) a fee may be charged of up to 1% of the amount advanced, typically £795 and will depend on your circumstances.
For non-conforming cases (where case research and processing may be more complex due to adverse credit or unusual circumstances), a fee may be charged of up to 3% of the amount advanced, typically £1,995.
THINK CAREFULLY BEFORE
SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Adding existing debt to your mortgage will increase the repayment term and overall cost.
Are you worried and becoming stressed because you are having problems getting a mortgage or remortgage? Worry and stress no more! Here at Shire Direct we provide tailor made mortgage solutions to suit you, and can usually help with all kinds of circumstances including...
Remember, we're here to help, and would love to hear from you!
Over £2,000 worth of Argos Vouchers to be won in the Shire Direct Grand Prize Draw 2008! Terms and conditions apply - please read article for full details.
Claim £100 worth of Argos Vouchers upon completion of your transaction throughout 2008. Terms and conditions apply - see our Vouchers Special Offer page for full details.
Shire Direct and Shire Direct Mortgages are trading styles of Shire Processing Centre Limited which is
Authorised and regulated by the Financial Services Authority in respect of regulated mortgage products and general insurances.
Registered No: 302389. Commercial funding and Secured Loans are not regulated by the FSA.
Licensed Credit Brokers. Consumer Credit Licence Number: 349999.
Shire Processing Centre Limited is registered under the provisions of the Data Protection Act by the Information Commissioners Office: Registration No: Z6795249. Registered in England & Wales. Company number: 2732202. Telephone calls may be recorded for training, monitoring and security purposes. All applicants must be aged 18-years or over.