This man intends to live mortgage free in a refurbished caravan
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Mortgage payments can be a significant financial responsibility across a person’s lifetime, and many will wish to eliminate their payments as soon as possible. Often considered as one of the best ways to do so is the idea of overpayment, which data has shown many individuals are currently grasping. Analysis from LifeSearch in their new quarterly update of the Health, Wealth and Happiness Study, has shown seven percent of Britons have overpaid their mortgage over the past six months.
On average, those who have overpaid on their mortgage have done so at an average rate of £319 per month.
Across the UK as a whole, then, this calculates at £1.5billion a month, or £7billion over the past six months.
Experts have suggested that repaying a mortgage could be a significantly more productive endeavour than saving.
With interest rates low, Britons are effectively losing out on money kept in accounts with a rate below inflation.
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Once a person has built up an emergency savings pot worth three to six months of income, then, they are being encouraged to explore other options.
One of these could be overpayments, or the repayment of debt as it is effectively, which could push Britons closer towards their life goals.
Those in Generation X – Britons aged 40 to 54 – have been seen to take significant initiative when it comes to accelerating towards this goal.
Some nine percent of these individuals have used money to overpay on their mortgage, at an average rate of £326 per month.
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Similar, and more successful increases, were taken by those in their mid 20s to late 30s, with 12 percent choosing to overpay.
Emma Walker, Chief Marketing Officer at LifeSearch who commissioned the study, said: “It’s encouraging to see the nation’s wealth begin to recover again after a long period of uncertainty and anxiety for so many.
“While the record levels of household savings seen in 2020 have fallen as spending has recovered, we’ve found a significant number of people are still choosing to save.
“But we can also see that many are also choosing to overpay on their mortgage and repay debts.”
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Ms Walker highlighted the impacts of overpayment, and how it could radically alter a situation for a homeowner.
When looking at an average 25 year mortgage, if a person chose to overpay, they could knock more than seven years off their term.
Indeed, this would also take approximately £12,000 off the average cost of the mortgage.
It is for this reason, Ms Walker highlighted, that overpayment could be the most appropriate solution for many.
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Overpayment, however, is an endeavour which needs to be carefully considered.
Some providers will only allow Britons to overpay a certain amount each year, before penalties are incurred.
This is usually a total of 10 percent each year if a person is on a fixed rate deal.
Generally, though, Britons are encouraged to use a mortgage overpayment calculator to determine how much they could benefit from this kind of action.