Making overpayments will 'shave years off mortgage'

Taking advantage of low mortgage rates by making overpayments can shave years off a mortgage.

A study by Barclays revealed that, based on a 25 year £150,000 repayment mortgage tracking at 2.49 per cent, paying as little as £50 extra a month could take over two years off a mortgage.

Furthermore, paying just £300 more will reduce the term by almost ten years.

However, despite this only ten per cent of people are taking advantage of current low mortgage rates and overpaying.

"Most mortgages allow a generous ten per cent overpayments per year so rounding your repayments up to a few pounds more a month is a really good habit to get into if you can afford it and will reap its rewards when you are mortgage free years earlier than planned," said Andy Gray, head of mortgages at the bank.

Moneysavingexpert.com agreed and said that it is usually better to pay off mortgages rather than contribute to savings, however the source said there are exceptions to every rule so provided a mortgage calculator to aid the decision.

Moneyextra.com recommends you take independent financial advice before acting on any article

Back

2011-03-16 13:03:38 © Moneyextra.com