How much do overpayments affect the cost of your mortgage?

How Do Overpayments Affect Your Mortgage

It is very interesting to see the direct effects of making even a small overpayment to any loan or mortgage.

Most mortgages will have clauses within their lending agreements whereby you cannot make more than a certain amount of overpayment to your mortgage per year, or month. This is again mirrored by unsecured debts such as loans, however not with credit cards.

To take a simple example, let’s use a loan amount of £100,000, spread over 25 years (300 months) at an annual interest rate of 4.79%.

The normal payment would be £572.42 – total cost of credit being £71,726.12 – nearly 72% of the original loan.

In this scenario, even a small overpayment of 5% – (£29) – would save you not only 2 years and 2 months of payments, but also £7,203.44 in interest charges. That’s a 10% saving in interest charges, by making a 5% overpayment.

Using our Mortgage Overpayment Calculator you can see the savings for yourself. The great part of this being our animated payments chart – hit play and you will see the difference in payments and the balance of your mortgage over the entire loan term.

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Disclaimer

This site is designed to give you an understanding of financial products out in the wild, preparing you for proper professional advice.

We have provided guides, tools, a selection of deals (lowest rate and/or fees) but expect you to seek full professional advice with a whole of market adviser before making any decision.

Use the information provided at your own risk, we're not providing advice and errors can be made. Calculations made on the site are estimates, therefore in places assumptions or approximations may be used. We cannot accept responsibility nor are liable for any mistakes.

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