Sandra Forscutt Mortgages

Welcome To Our Mortgage Educational Blog About:

Can I Overpay My Monthly Mortgage Amount?

You will likely play it safe with the repayments when taking out a mortgage. This means taking monthly mortgage payments on the conservative side so that you can make the repayments comfortably.

However, things might change at some point in the mortgage term, and you will find that you can make higher payments than those stipulated in your contract. But are you allowed to do this? Indeed you can. 

Mortgage Overpayment

Overpaying a mortgage means voluntarily paying more than the stipulated amount prescribed by the lender. 

You can overpay by:

  • Making a one-off payment, or occasional lump sum payments
  • Making the usual regular payments, only at higher amounts

Each lender stipulates how to go about this, so you need to check with your lender to know what you can and can’t do.

But why make a mortgage overpayment?

For most people, mortgage overpayments are their biggest, regular running expense. So why take on more?

Several reasons. 

Sometimes, your finances get better, meaning you have a surplus income. This can be from a better job, a promotion, bonuses at work, cash gifts, an inheritance, or you get married, becoming a two-income household and so on.

You can decide to save the surplus, but at times, paying off your mortgage has a better return and makes more financial sense than stashing the cash away in savings. 

Overpaying your mortgage could be beneficial in several ways. These include:

Becoming mortgage-free sooner

Making more payments shortens the repayment duration, meaning you finish your mortgage sooner. This is every homeowner’s dream: to clear your mortgage and become a fully-fledged, mortgage-free homeowner. 

Interest reduction

Interest paid on a mortgage is spread out over the repayment term. The longer the term, the higher the total interest, and vice versa. 

Making overpayments shortens the repayment duration and lowers the total interest paid.

Interest is charged on a lower amount

When you make lump sum payments in overpayments, interest is charged on a lower amount (what you owe, less the overpayment amount).

You could increase your house equity sooner

By paying off more of the capital sooner, you reduce your Loan-To-Value (LTV) ratio. This gives you access to even more competitive mortgages should you remortgage to another deal in future.

More flexibility

Some mortgage contracts allow you to make overpayments regularly or as and when you are in a position to do so. This is especially true if you manage your mortgage through an app or online.

This flexibility allows you to make overpayments when you can and skip them when cash is tight.

Over and above the above benefits, remember that most lenders only let you overpay by 10% every year. Most lenders will charge additional fees or penalties when you go beyond this.

The Final Word

Most first-time home buyers fumble in the dark regarding their mortgage and home purchase. Fortunately, this doesn’t have to be the case.

The Metro Mortgage Group provides valuable resources to guide you through all mortgage matters. Find all information you might need on our website, and give us a call if you need a one-on-one consultation. 

Don’t go in blind; call me.

Are you ready to purchase your first home? Reach out to me directly or start your application here:

Don’t hesitate to contact us with any questions you may have.

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