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Overpaying your Mortgage – Is it worth it? – COMMENT

Editors Note: The following content is a comment piece from James Andrews, Senior Personal Finance editor at

Using any savings accumulated during lockdown to overpay on your mortgage can be a shrewd move for homeowners looking to clear their debt sooner.

Overpaying on a mortgage can also save you thousands of pounds in interest charges. For example, a monthly overpayment of £200 on a £200,000 mortgage could save you £21,622 in interest. You would also clear your debt and be mortgage-free five years and 11 months quicker. This example is based on an interest rate of 3%, and a 25 year term.

There are a couple of points to be careful of, though. First, most lenders set a limit on how much you can overpay penalty-free – typically £500 a month or 10% of the total loan each year. Go above that amount and you could be hit with charges.

Second, some mortgages also let you re-borrow money you overpay – meaning rather than being lost, money spent overpaying on your mortgage is effectively sitting in a savings account paying you the same interest as you’re being charged on your home loan.

If yours doesn’t allow this, it’s wise to keep back some savings rather than put it all towards your mortgage. The last thing you want is an unexpected bill meaning you have to take out expensive credit, far outweighing the savings you make on your mortgage.

In order to assess how your lockdown savings could help towards paying off your mortgage, has a mortgage overpayment calculator that can reveal how your term and interest payments could be reduced. Simply enter in details regarding your outstanding balance, remaining mortgage term, annual interest rate, whether you’d like to pay recurring or one-off overpayments (or both), and how much you’d like to overpay by.

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