Lockdown savings? Should you overpay on your mortgage?
Some families have found it easier to save more than normal during the pandemic, due to reduced outgoings on things like commuting, holidays and entertainment. If you have a mortgage, overpaying is one option worth considering.
Benefits of overpaying
In a low-rate environment, savings rates are likely to be lower than your mortgage rate, so any 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, as well as reducing your mortgage term.
• Before overpaying, make sure that you have a financial safety net that would cover your outgoings if your circumstances suddenly change
• Some mortgages will have a charge for overpaying, so make sure you check the mortgage terms first
• Do you have other debts, such as credit cards or loans, that are likely to have a higher interest rate?
• Are you saving enough for other long-term plans, such as retirement?
Although it can often make financial sense to overpay on your mortgage, this option won’t be right for everyone. We can help you to understand your mortgage options.
As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.