by Demarco Gonzalez | November 24, 2018 1:33 pm
Overpayment of mortgage has always been a heated debate in the mortgage industry. Some may consider it beneficial while others may point out a number of drawbacks associated with it. However, overpayment saves money by reducing the size of the mortgage and the amount of interest that has to be paid overall.
Generally, you can use a mortgage overpayment calculator to find out how much money you can save. From an objective standpoint, a great deal of money can be saved by overpaying the mortgage.
Overpayments mean that the mortgage is paid off much quicker. More the overpayment tends to be, faster the repayment is done. Either regular monthly payments can be made or just a one-off payment can be preferred as well. Those who has more equity in their property, they tend to have the best mortgage deals. This is why overpayments even help to increase equity and helps in getting a better deal when the fixed term is completed.
How much can be saved and how to make payment?
Online calculators can be used to get an accurate estimate of the amount that can be saved. However, overpayments can help in saving more money compared to earnings from savings.
Generally, almost all the mortgages have a specific limit on how much can be overpaid during a year. This will normally be 10% of the balance but the deals tend to get stricter. However, there are some flexible deals as well. Before any overpayments are made, it is imperative to find out the fees and limits by asking the lenders. Also check the paperwork to get a firm idea about it.
It is simple to contact the lenders and make the first overpayment. This means that limits and fees can be checked out before it is paid through online bank transfer or debit card. Standing orders can be utilized as well as a form of payment.
Should you overpay?
If you have the capability of overpaying the mortgage, then it is highly recommendable to do so even though there are minor drawbacks. It can help saving money in the long run given the interest rates are so low. However, it is important to work out whether you can afford to overpay. Also consider how this will have an impact on the finances. Go through the terms and conditions of the mortgages and speak to the lender in detail before making an overpayment to have a well-informed idea.
As mentioned above, there are few drawbacks as well but that doesn’t mean not overpaying the mortgage if you have the ability. There are some mortgage lenders that might charge an additional amount if the payment is more than the usual amount. This can even be a problem if you are in need of money in case of an emergency. In such scenarios, overpayment may turn out to be a drawback but generally the benefits clearly outweighs the drawbacks making it recommendable to do so.
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