#20 Don't miss this great opportunity to clear your mortgage early!

by Jane Baker on 14 August 2009  |  9 comments
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Today's nugget of 'what not to with money' advice is all about overpaying your mortgage.

Today's nugget of 'what not to with money' advice is all about overpaying your mortgage.

#20 Don't miss this great opportunity to clear your mortgage early!

There hasn't been too much to be happy about in this financial crisis. That is unless you're one of the lucky homeowners who are now enjoying cheaper mortgage repayments.

You may now be in the enviable position of having a bit of budget surplus for a change. But, how can you put that extra cash to good use?

Sure you could fritter the money on one or two of the finer things in life, but where's the financial sense in that? My far more sensible, albeit not as much fun, advice is this: why not overpay your mortgage?

Maybe you've already thought that sounds like a pretty good idea. But if you haven't quite got round to having a word with your lender I suggest you do because the financial rewards could be far greater than you realise.

So, take a look at my very quickly crunched numbers...

Let's say you have a mortgage of £150,000 and your original two-year fixed rate was 5.5%. Your monthly repayments based on a 25-year term were £921.

You've just reached the end of your fixed rate deal so you then move onto your lenders standard variable rate which is 4.25%. Your outstanding mortgage has reduced to £144,347 and your repayments are now over £100 less at £820.

But what happens if you keep paying £921 a month as before? If you did that, you'd clear your mortgage 3 years and 9 months early AND you'd save almost £15,000 in interest into the bargain!

Now I'd say that's putting an extra £100 a month to good use!