There is no denying the pandemic has impacted people and households in many ways. However, depending on your employment status, job, or company you work for, you might find your finances are currently in a far more powerful position than your neighbours, colleagues, or associates. If you are considering mortgage overpayments, this might be a smart time.
Therefore, it is essential people consider their circumstances and make informed decisions that allow them to feel confident about what comes next.
Naturally, a great deal of focus has fallen on those struggling financially and who require assistance to pay their mortgage and everyday household bills. For these households, there needs to be swift and practical support.
Some people have done well during the pandemic
For the households who have done well financially during the pandemic, there is also a need for support. If people have been able to carry on working or have been even busier, they might have found they have very little to spend their money on. Entertainment options have been minimal, travel options have been non-existent and people might have reduced their expenditure on clothes and even beauty products!
In some households, people will have additional money, and it is sensible to look for ways to use this money effectively. For example, if you have a mortgage, you might be considering making mortgage overpayments or looking for ways to decrease the term of your mortgage.
Mortgage overpayments often sense
Principally, these actions result in the same outcome and are both of benefit to mortgage holders. The outcome sees a reduction in the overall amount of interest paid on the mortgage, and the length of time the mortgage runs for is shorter.
Most people will feel significantly relieved at this sort of outcome. Knowing that you are saving money in the long term and not having your mortgage hanging over you is liberating.
You also don’t need a massive amount of additional money each month to make a significant dent in the overall cost of your mortgage.
Mortgage overpayments can lead to savings
A household that was able to make an overpayment of £1,000 a month; at an interest rate of 2.5% could save over £21,000 in interest payments. Also, the household could reduce the length of their mortgage by more than nine years, which is an aim of many people.
Once your mortgage has been paid off, many households have a sense of freedom and might start to look forward to their retirement with greater confidence. You can see why this appeals to many people.
So, what is the better option for mortgage holders?
While they are both excellent options, overpaying your mortgage is likely to be the preferred option because it is more flexible. If your situation changes again, or something arises, you can stop, reduce and restart overpayments at any time. However, if you commit to paying off your mortgage in a shorter time frame, you don’t have this flexibility, which might be an issue if your circumstances change.
Of course, you must make sure you can make overpayments with your mortgage. Unfortunately, not every lender allows this activity.
Therefore, it is best to speak with a professional who knows the industry and advise you on the terms and conditions of your mortgage.
How to explore your mortgage options with The Money Hub
Call The Moneyhub Limited on 0203 725 5830 and speak to one of our highly specialised and dedicated Mortgage Advisors or you can complete an enquiry form which will allow you to schedule a call time.
DISCLAIMER: These articles are for information only and should not be construed as advice. You should always seek advice prior to taking any action.