How to save over £1,400 by overpaying your mortgage by just a tenner a month
SAVVY savers can save over £1,400 by overpaying their mortgage by just a tenner a month.
While setting aside an extra £100 a month could leave you over £11,800 better off and leave you mortgage-free over four years earlier than expected, exclusive data from Santander shows.
When you take out a mortgage to buy a property, you agree to a minimum amount to pay back to your lender each month.
If you overpay on your mortgage, it means you pay more than the minimum amount, either regularly every month or as a lump sum.
Overpaying on your mortgage could save you thousands of pounds in interest in the long-run, according to Santander's research.
If you coughed up just a tenner extra a month, you could save £1,431 in interest and be mortgage-free six months early.
This is based on a mortgage of £150,000 on a 25-year term, with a current interest rate of 3%.
You'll save even more by upping your overpayments.
Squirrelling away an extra £25 a month to pay off your mortgage could save you £2,458 over the term and you'll pay off your debt a year and two months early.
Overpaying by £50 a month will save you £3,458 and knock two years and four months off your repayment schedule.
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While homeowners lucky enough to have £100 extra to put towards overpayments could save £11,843 in total - and clear their loan four years and three months ahead of schedule.
Santander head of business development Graham Sellar said it's worth checking with your lender if you can make extra payments.
Some mortgages will have a limit on the amount you can overpay - this is typically 10% of the value of the outstanding loan per year, but it can vary.
He said: "Before making any extra payment, check that you’ve got enough money set aside for a rainy day and if you’ve got other more expensive debts, it might be worth considering repaying them first.
"If you’re good on both those fronts, then it’s worth getting in touch with your mortgage lender and seeing how much you can save.”
It's a good idea to use tools, like MoneySavingExpert's to work out how much you could save if you overpay your mortgage.
The Sun has spoken to homeowners who have paid off - or are on track to - their mortgage early.
Mum-of-two Charlotte Jessop and her husband have already paid an extra £30,000 off their mortgage.
While another savvy saving couple paid off their £84,000 mortgage in just nine years.
How to overpay on your mortgage
Before you think about making extra payments, check with your lender if you can actually do this.
Some lenders might not let you make overpayments at all - make sure you get all the information you need about whether you can set up a regular or one-off payment.
You should also be aware that you might be slapped with a fee if you overpay too much on your mortgage.
Usually, you'll have to pay an early repayment charge if you overpay by more than 10% of the outstanding balance on your mortgage per year.
But some lenders might even let you make payments charge-free for up to 20% of that year's mortgage balance.
meanwhile, some tracker mortgages have no limits on the amount you can overpay.
Make sure you're clued up on what the charges are before you take the plunge and overpay.
Habito mortgage expert Rosie Fish recommends updating your lender on your overpayment plans too.
"Make sure you tell your lender that the reason you’re overpaying is to reduce your mortgage term - otherwise they might keep your term the same, and use your lump-sum overpayment to reduce your monthly payments," she said.
Quilter mortgage expert Karen Noye said it's best to clear other more expensive loans you have before considering overpaying.
"If you have racked up big bills on credit cards or taking out expensive loans its usually best to clear these first before you start to overpay on your mortgage," she said.
While Trussle head of mortgage Miles Robinson says overpaying your mortgage won't be for everyone.
"It is vital you explore your financial situation and the best options available to you.
"For example, if your mortgage has a low interest rate and you have high-interest investment options available to you, you may benefit more from investing your money, whilst continuing your regular mortgage payments."
Here's how to save thousands as mortgage rates hit a record low.
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