Why Don’t People Overpay Their Mortgages
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Overpaying Your Mortgage
A survey including 56% of homeowners with a don’t take up the option of overpaying despite most applicants starting off their mortgage journey with that intention to speed up the process.
It is common knowledge that overpaying, regardless of the amount, makes a big difference in terms of the interest paid back over the term. The earlier you start with overpayments, the faster you see the effects.
Reasons why people don’t overpay?
The survey carried out by Compare The Market highlights how Homeowners, simply can’t afford to make the overpayments on their homes. We all know a plan can seem good at the moment but sometimes it’s a bit harder to carry out, especially when there are many other things in life which also need financial attention.
Another part of the problem is also remembering to overpay. When you have payments going out automatically through direct debit it’s more of a case as out of sight and out of mind meaning, unless you have a few years left, it’s not something a person would think about often.
If these reasons sound familiar and you would like to get more into the habit of overpaying for purposes such as early retirement, then a few tips are included to help you out.
A suitable recommendation would be to set up a standing order each month that is payable to your Lender, to go out on the same day as your mortgage payment. So if your mortgage payment goes out on the 1st, the make sure the standing order is set to go out on the 1st too. The reason for them both scheduled for the same day is that you’ll start forming the idea that your mortgage adds up to the two payments combined and you’ll restructure your finances.
The advantage of doing this is that unlike a direct debit, a standing order is able to be modified from the person who’s paying as opposed to the receiver. That means a simple adjustment can be made by logging into your mobile banking and cancelling if needed.
Although it is a shame if you do have to stop overpaying for certain reasons, the overpayments you have done up until this point will have had a positive effect. So some good will come of the payments. Further bonuses also come from overpaying such as being able to take payment breaks or reduced payments within your mortgage if you have been paying a substantial amount towards your mortgage.
Overpaying your mortgage is a great thing to do if you want to reduce your mortgage by a few years or finish your mortgage early if you’re in the position to do so.
It is important to check with your lender beforehand that you are eligible to take a payment break to avoid a negative mark on your credit report.