This man intends to live mortgage free in a refurbished caravan
Make the most of your money by signing up to our newsletter for FREE now
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
A mortgage is one of the most substantial financial responsibilities a person will have in their lifetime, and often climbs into hundreds of thousands of pounds. The faster a person pays this off, then, the better, with many hoping to relieve themselves of this burden as soon as possible. Helping Britons to pursue this goal, experts have highlighted how the lockdown could propel borrowers towards paying off their mortgage sooner.
A boost in the UK’s savings during lockdown, it has been asserted by Halifax, could be the key to slashing thousands of pounds of interest and indeed, the term of a mortgage.
Additional lockdown cash could be put towards mortgage overpayments in what is being described as a “once in a lifetime financial opportunity”.
Halifax has reminded Britons that most mortgages allow some level of overpayment, either on an ad-hoc or regular basis, without a penalty being incurred.
However, it is estimated that fewer than half of mortgage payees are currently taking advantage of this feature.
Mortgage free: Britons urged to use ‘once in a lifetime’ chance to pay off sum – take action (Image: Getty)
With more than 10 million mortgages outstanding, potentially millions of homeowners could be able to save substantial sums in interest.
One example cited relates to a £200,000 mortgage and the impact of changing one’s attitude towards payments.
If a person were to pay £90 extra per month – 50 percent of median monthly savings – from the first payment onwards, the total cost would be reduced by more than £16,800 – and the term by over three years.
However, overpayments do not even need to start this early in order for Britons to save money.
Furlough update: HMRC issues new guidance as scheme winds down [UPDATE]
NatWest is offering £50 cash to new student customers – act now [INSIGHT]
Pension warning as Britons ‘in the dark’ about money for retirement [ANALYSIS]
Even if a person pays an extra £90 per month from the mortgage’s 10th anniversary, they could still save £5,300 in interest and cut 18 months off their term.
If someone has managed to save during lockdown, putting this extra cash – some or all – towards a mortgage can make a significant difference.
For example, if a person puts down a £5,000 lump sum on a £100,000 loan with 15 years remaining, they could save £3,866 in interest and slash their term by 13 months.
Russell Galley, Managing Director at Halifax, commented on the matter.
He said: “The last year has been difficult, but there are all sorts of people for whom lockdown has brought financial benefits they may not have fully realised yet.
Mortgage: Most affordable places to buy (Image: EXPRESS)
“Whether it’s a lump sum or a bit extra paid each month, overpayments could cut the cost of buying your home by tens of thousands of pounds and see you mortgage-free months, if not years, early.
“Not being able to take a holiday, not having the same travel expenses, or just not going out could mean some people have saved a sizeable amount.
“Some will want to splash out with a return to the shops or on that holiday, but for others lockdown may provide a once in a lifetime opportunity to significantly reduce their mortgage.”
Before making a mortgage overpayment, Britons are urged to check whether their mortgage will let them overpay.
What is happening where you live? Find out by adding your postcode or visit InYourArea
Most have annual overpayment limits of 10 percent which, if exceeded, could trigger an additional feel.
Money Helper, a service backed by the Government, has urged Britons to time their overpayments correctly, in addition.
First, individuals should find out whether they are charged interest daily or annually.
If daily, borrowers will be able to overpay at any time, whereas if annually, the overpayment needs to be timed so it counts for the whole year.