Mortgages inspire a range of opinion, rather like home insurance. Mortgages form a great aspiration for some as careers and savings are given material form in a place to call their own. To others, a mortgage seems like a decades-long weight of huge sums of money costing interest every year.
Fortunately, new research has revealed a strong trend of homeowners paying off mortgages early, potentially saving them interest payments and making big strides towards financial independence.
If you have or are looking to buying a new home then another financial consideration to consider is home insurance. Home insurance can give you protection to help protect your emotional and financial investment in your new property.
Which? Mortgage Advisers said almost half (46%) of homeowners overpaid on their mortgage, with 18-24 years olds leading the pack with as many as seven in 10 (69%) paying off more of their loan than previously arranged.
The research found that of all those surveyed, people in London (60%) and the West Midlands (52%) were the most likely to be making overpayments on their mortgages, while Scotland had the lowest level of overpayments at 38%.
Paying down a mortgage early is so popular with some homeowners that a quarter (25%) are paying extra towards their mortgage on a monthly basis, with an average overpayment from June 2017 to June 2018 of 14.3%.
Which? concluded that poor interest rates from savings accounts could be one factor driving the high levels of mortgage overpayments, making minimising such debts one of the best long-term investment options. In September, Which? revealed that numerous banks were failing to pass base rate rises on to customers with savings accounts.
“While it might be surprising to hear that so many people have paid off extra chunks of their mortgage recently, the benefits can be massive, cutting months off the total length of your loan – and, in turn, saving you hundreds or even thousands in interest," said David Blake, Principal Mortgage Adviser, Which? Mortgage Advisers.
“If you haven’t done so recently, you may want to look at your remortgaging options to ensure you’re paying the best possible rate and have the flexibility to overpay when possible.”
Which? Mortgage overpayment tips:
Some mortgage lenders limit the amount you can overpay to 10% per year.
You can either make regular overpayments or do it in lump sums.
Before making an overpayment consider what else you might need the money for (e.g. home improvements).
Consider remortgaging to a cheaper deal so that you can afford to pay off your mortgage even faster.