Published: 31/10/2023
Overpaying by just £5 a month could shave over £2,000 off your mortgageOverpaying on your mortgage can indeed have a substantial impact on your long-term financial health. Here's a breakdown of the potential savings and benefits of making regular overpayments on your mortgage, as shown in the table:
Overpaying on your mortgage can indeed have a substantial impact on your long-term financial health. Here's a breakdown of the potential savings and benefits of making regular overpayments on your mortgage, as shown in the table:
| Monthly overpayment | Total amount paid back over mortgage term | Total amount saved over mortgage term | Time taken off mortgage term |
| £0 | £392,101 | £0 | None |
| £5 | £397,744 | £2,147 | 3 months |
| £25 | £389,652 | £10,239 | 1 year, 1 month |
| £50 | £380,520 | £19,371 | 2 years, 1 month |
| £100 | £364,885 | £35,006 | 3 years, 9 months |
| £250 | £331,667 | £68,224 | 7 years, 6 months |
As demonstrated in the table, even relatively small monthly overpayments can lead to significant savings over the life of your mortgage. Here's what these figures mean:
Total Amount Paid Back: This is the total cost of your mortgage, including both the principal (original loan amount) and the interest paid over the mortgage term.
Total Amount Saved: This is the amount you save in interest payments by making overpayments. The savings increase as your overpayment amount goes up.
Time Taken Off Mortgage Term: Overpayments result in a reduced mortgage term, which means you'll pay off your mortgage more quickly. The more you overpay, the more time you shave off your mortgage.
These calculations are based on a £200,000 mortgage with a 25-year term and an interest rate of 6.36%. It's important to note that the actual savings may vary depending on the specific terms of your mortgage and the interest rate. In a high-interest environment, like the one mentioned, overpaying on your mortgage can be a financially savvy move, as it helps you pay down your debt faster and save on interest costs.
Sourced from Which.co.uk