Why People Aren’t Overpaying Mortgages?
According to a survey, over half of homeowners with a mortgage never overpay. This is interesting because almost all applicants say they intend on overpaying their mortgages at the start (or at least that’s what they tell me!).
Homeowners know that overpaying mortgages, even by small amounts, can have a big impact on the amount of interest you end up paying back. The earlier you start overpaying the better as the extra payments have a longer period to have an effect.
The survey by Compare the Market suggests that homeowners cannot afford to make extra payments, but I feel the main reason is that life simply gets in the way. We know overpaying is the “right” thing to do but, let’s face it, there’s always something more exciting to spend your money on!
Part of the problem here is remembering to overpay. It’s not something that’s particularly likely to cross your mind too often. Possibly when your mortgage only has a few years left, but the impact at that point isn’t as great as it could have been if you’d done it earlier.
So, if you would like to overpay what should you do?
An easy way to make overpaying part of your routine is to set up a standing order paying your lender each month. Even better, organise it so that it goes out the same day as your mortgage payments. This way, it just feels like one amount and you will become used to this.
By using a standing order, you’re in control. Unlike a direct debit which the receiver controls, you can easily cancel a standing order if your financial situation changes. Whilst it would be a shame to stop overpaying, at least you would benefit from the overpayments made up until that point.
Overpaying your mortgage is a great habit to get into. You don’t need to pay huge amounts unless you feel you can. But you’ll be grateful toward the end when you realise you’ve been able to shave a year or two off your repayments.
If you overpay, some mortgage providers will even let you make reduced payments or take a payment holiday if you have been overpaying for a while. Before taking a payment break though, it’s important to check with your lender that you are eligible to do so as you could face a negative mark on your credit report if you’re not.