For most of us, the mortgage is the biggest monthly bill we face.
After all, a home loan is the largest borrowing the majority of people ever take out, and it will likely take decades to clear it.
But overpayments ‒ where you top up your regular monthly payment with extra cash ‒ are a smart way to pay off the mortgage early and save thousands in the process.
What’s more, a new app is launching which allows you to make those overpayments without even noticing.
Saving without realising
The Sprive app works by connecting with your regular bank account.
It then monitors the way that you manage your money, and your spending habits. Money is then set aside automatically based on your spending ‒ the less you spend, the more is put aside.
You can then approve for the money to be sent to your mortgage lender as an overpayment, topping up your regular monthly repayment. Alternatively, you can opt to keep the money in your bank account instead.
The idea is that you don’t need to commit yourself to a regular overpayment ‒ instead, you simply pay what the algorithm calculates that you can afford.
It’s worth noting that currently, the number of lenders working with Sprive is relatively small at the moment. They include the likes of Lloyds, HSBC, Barclays, Santander, Halifax, NatWest, RBS, Yorkshire Building Society and TSB.
Handily, Sprive doesn’t actually charge users anything. So not only do you end up paying the mortgage off more swiftly, it doesn’t cost you a penny to make use of that system either.
The difference that overpayment makes
Let’s demonstrate what a difference regular overpayments can make with an example of a borrower with a £150,000 outstanding mortgage on a 25-year term at a 3.5% interest rate.
Your normal mortgage repayment will stand at £751 per month. Now, if you opt to overpay by an additional £100 a month, then you’ll pay the mortgage off four years and four months early.
It’s not just the time that’s a big consideration here though ‒ paying off the mortgage early will save you a small fortune in interest payments too. In this example, it would mean saving more than £14,000 on interest payments, an enormous amount.
Of course, not everyone has an extra £100 to devote to the mortgage every month. But every penny makes a difference here.
Help with remortgaging
Sprive is authorised via Albury Park Ltd, which is a mortgage broker. It has also said that in future it hopes to have a tool up and running that monitors the mortgage market and can flag up as and when a better deal comes up which could save you money.
It’s a smart setup really.
The app can essentially serve as a lead generator for the mortgage broker, so if and when you want some help searching the market for a new mortgage, they are ready and waiting to step in, and earn some commission to boot.
That’s not a bad decision, by the way.
According to recent research, as many as 90% of mortgages placed in the last year went through intermediaries, and with good reason.
There are some lenders who only offer their deals through brokers, meaning using an adviser provides you with a greater level of choice.
On top of that, given many of us have seen our financial situation become a little more complex due to Covid, it makes sense to tap into the expertise of a broker who is well placed to know precisely which lenders will look most kindly on your application.
Making overpayment easy
Sprive follows in the footsteps of another smart innovation aimed at boosting overpayments which we covered last year, Accelerate My Mortgage.
Accelerate My Mortgage is a cashback website, which allows you to earn some money back each and every time you shop online. However, the crucial difference is that rather than have that cashback paid into your bank account, it instead goes to your mortgage lender as an overpayment.
Again, it’s the brainwave of a mortgage broker, but it’s a clever way to make overpayments more accessible.
There’s no need to go through your budgets every month to try to find £50 here and there that you could instead devote to your mortgage repayments ‒ instead every time you shop, you pay off a chunk of your mortgage as well.
Every overpayment helps
As with Accelerate My Mortgage last year, I really like the thinking behind Sprive. It’s a nifty way to get people to pay a little more towards their mortgage each month and therefore get mortgage free earlier.
The fact that it works almost subconsciously, so you won’t really notice the money going, is pretty smart too.
Ultimately, so long as you can afford it, overpaying is not something you’re going to regret, and any tool that gets us into the habit of doing it more often has to be welcome.