Too many people are heading into retirement with uncleared mortgages and other debts that can be impossible to clear once you have stopped working.By making overpayments today you can clear your mortgage years earlier and save a small fortune in interest. Mortgage holders could save more than £1, 800 in interest by making regular overpayments, according to research from CompareTheMarket.com. Somebody with the average mortgage, which is currently £94, 686 with 14 years left on the term, could make big savings simply by overpaying by 10 per cent each month. This would cost them an extra £59, but save £1, 842 in interest repayments, and will also cut their mortgage term by one year and four months.
To make this easier to understand, the recent reduction in interest rates of 0.25% on an average mortgage equates to about £20 of savings on an interest only mortgage. Now this doesn’t seem like a lot, but if you manage to eek out an extra £100 a month overpayment, you could save six years of repayments. To help you calculate the savings we have prepared a mortgage repayment calculator (albeit a bit basis) where you can enter the overpayment for each month and you will see how much time (and money) is saved by making that extra effort.
Perhaps everyone should look at shaving that little bit more off their mortgage every month.