Scottish homeowners save by making overpayments on mortgage
More than a third of Scottish homeowners with a mortgage say they have been making overpayments on their home loan in recent months – potentially meaning they will be mortgage-free earlier than they had expected – a survey has found.
Young homeowners, many of whom may have decades of paying a mortgage off ahead of them, are particularly likely to have been making overpayments, the survey of home owners from Which? Mortgage Advisers found.
Paying off extra chunks of their mortgage could potentially help homeowners to clear their debt earlier than they had originally planned, with some of those surveyed saying they are chipping away at their mortgage debt in this way each month.
Some 46 per cent of homeowners said they had made overpayments during the 12 months leading up to June 2018, including 69 per cent of 18- to 24-year-olds and 52 per cent those aged 25 to 34.
Of those surveyed, people in London (60 per cent) and the West Midlands (52 per cent) were the most likely to be making overpayments on their mortgages, while Scotland had the lowest level of overpayments, with 38 per cent saying they had done so in the year up to June.
Poor interest rates from money sitting in savings accounts could be one factor driving the high levels of homeowners using their cash to make mortgage overpayments, those behind the research suggested.
Continued low interest rates on mortgages, making debts relatively affordable, could also mean some borrowers have a bit of spare cash left over which they can put towards paying their loan off more quickly.
David Blake, principal mortgage adviser, Which? Mortgage Advisers, said: “While it might be surprising to hear that so many people have paid off extra chunks of their mortgage recently, the benefits can be massive, cutting months off the total length of your loan – and, in turn, saving you hundreds or even thousands in interest.”
More than 3,500 homeowners with a mortgage were surveyed.
Here are some mortgage overpayment tips from Which? Mortgage Advisers:
n You could consider either making regular overpayments or doing it in lump sums.
n Consider re-mortgaging to a cheaper deal so that you can afford to pay off your mortgage even faster.
n Before making an overpayment consider what else you might need the money for, such as home improvements.
n Some mortgage lenders limit the amount you can overpay to 10 per cent per year.