MoneySavingExpert.com Martin Lewis is urging people to find out if they are able to save thousands on the mortgage by simply overpaying on their repayment.
Lewis shared is simple but truly highly effective way to save money by going to Mortgage Overpayment Calculator tool, advising people that overpaying may add up, even if your savings pay a little more than your mortgage payments.
His top tips come as people are worried over the Bank of England’s interest rate rise, the cost of living, the energy crisis and food inflation which is eating away at people’s disposable income.
Lewis said, “The simple rule: if your mortgage rate is higher than you can earn in savings, overpaying adds up.
“After all, £10,000 saved at three percent earns £300 for the year, yet use it to overpay a five percent mortgage and it reduces costs by £500 over the same period.
“Overpaying is effectively tax-free ‘saving’ at the mortgage rate. Yet remember, millions of savers are being ripped off earning diddly-squat.”
The Money saving expert also pointed out that by making overpayments to reduce your mortgage could also help you getting a better deal in the future.
On his website Lewis advises, “Before overpaying your mortgage, check your lender allows you to do this penalty-free, and if there are any limits on how much you can overpay by.
“If you’re on your lender’s standard variable rate, there’s normally no limit. But most fixed-rate mortgages and some tracker mortgages have an annual overpayment limit of 10% of your TOTAL outstanding mortgage balance.
“As the exact method of how this 10% is calculated varies by lender, use our calculator as a rough guide. Then speak to your lender to work out exactly how much you can overpay by.
“Also ensure that any overpayment you make goes to reduce the debt (so shortening the term) rather than reducing your monthly payments. This calculator assumes you reduce the mortgage debt, which is the main benefit of overpaying.”
Lewis shared a tweet from Twitter user @rainbowchaser79 who said she had saved “tens of thousands of pounds in interest,” adding that she was able to get mortgage free 17 years earlier than expected, by using the Moneysavingexpert.com overpayment calculator.