Why Aren’t People Overpaying Mortgages?
According to a survey by Compare The Market, over half of the people with a mortgage never overpay. Even though overpaying mortgages is the intention of most successful applicants at the start (or at least that’s what they tell us).
Many homeowners are aware that overpaying can have a big impact on the amount of interest they end up paying back. Even small overpayments can have a noticeable impact. The trick is to start overpaying early because then the extra payments have a longer period to take effect.
The survey suggests that the reason people don’t overpay is that they can’t afford it. However, we feel the main reason is that life simply gets in the way. Given the figures, we all know that overpaying is the “right” thing to do. But, let’s be honest, there’s always something more exciting to spend your money on!
For some people, the issue also comes with remembering to overpay. To be honest, it’s not something that’s particularly likely to cross your mind too often if you don’t have a reminder setup. Potentially, you might think about it more when your mortgage only has a few years left. However, at this stage, the impact isn’t as great as it could be if you do 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. Even better, organise it so that it goes out at the same time as your regular mortgage payment. This way, it feels like just one amount and you will become used to it.
Another benefit of using a standing order is that 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 aren’t committed to anything you can’t afford.
As we’ve discussed throughout this article, 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 mortgage repayments.
It’s not uncommon for some mortgage providers to even let you make reduced payments or take a payment holiday if you have been overpaying for a while. However, before you take a payment break, it’s important to check with your lender that you are eligible to do so. Because, if you’re not, you could face a negative mark on your credit report.