Put your questions to our mortgage expert, Mike Jones, from Lloyds:-
David from Scotland asks:
I have £69k to repay on my mortgage over the next 15 years. Would I be better off repaying the mortgage off now as I have the funds to do so?
Thanks for your question. Whether you are considering overpaying on your mortgage or repaying it in full, you would certainly benefit from becoming mortgage-free sooner. Put very simply, you end up saving more money in interest charges. I've laid out some examples below to show you the potential benefits based upon typical interest rates on a repayment mortgage, and the information you gave me. However, of course, you should also be aware of any risks and speak to your mortgage provider. Again, I've highlighted some of the main risks to be aware of below.
Firstly, if you are looking to pay your mortgage off in full, you could well be saving between £20,000 and £30,000 in interest charges over the next 15 years. However, even if you're looking to make smaller regular overpayments, the benefits can be surprisingly significant.
In general, by overpaying by just £25 a month, you could become mortgage-free around 11 months earlier, and save over £1,500 on interest charges, based upon typical interest rates. By overpaying by £100 a month, you could become mortgage-free over 3 years earlier, and save over £5,000 in interest charges, again based upon typical interest rates.
As I mentioned, there are a number of risks, or at least things you need to speak to your Mortgage provider about. For instance, does the product you hold actually allow you to overpay, and if so, by how much? If you exceed any allowance, are there Early Repayment Charges (ERCs) to consider?
You also need to consider how much you can afford to repay, and how it could affect your financial situation in the future. How will you be affected if interest rates rise? And does your current lender offer any 'flexible features', allowing you to underpay in the future if you overpay now.
Added to this, you should also be aware of the other financial options on offer. Really, it is a very personal trade off between the value you attach to having your mortgage paid off early and whether you want to have a greater amount of savings available to you. It might be that, if you do want to keep hold of your money rather than overpay on your mortgage, you would benefit from finding the right savings or investment account, for instance. Once you have considered all this, it would be wise to go and speak to the Mortgage Advisor at your local branch about the above questions, and come to an agreement that best suits your needs. I hope this helps.
If you have a question for Mike, go to the myfinances.co.uk Ask the Mortgage Expert section.
Or for more information on your mortgage options go to Lloyd's mortgage site.
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