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  A Popular Mortgage MythThere is a little known tip for saving money on your mortgage that does not involve skipping from lender to lender at the end of each term. If this is something you would like to know about, then please read on.Did you know, for instance, that making overpayments on your mortgage can slash thousands of pounds off your interest bill? Additionally, it will cut the length of time taken to repay your home loan so you get to own your home sooner. Imagine, say, that you have a £100,000 repayment mortgage, with a 25-year term and an interest rate of 6%. Your monthly payments will be £644, and after 25 years you will have paid back a total of £193,290. In other words you will have paid back £1.93 for every pound borrowed. If, however, you were to overpay your mortgage by just £50 each month, your total payment would be reduced to £177,279 -- a saving of over sixteen grand in interest. Furthermore, this overpayment shortens the length of the mortgage by 45 months, which means almost four extra years of bliss. Before you rush out to change your standing order or dump a lump sum into your mortgage, check to make sure that your lender won't punish you for doing so. In the main, most flexible mortgage lenders will allow you to make overpayments of up to 10% each year. But if your lender doesn't allow this, you have another trick up your sleeve! Lessening the term of your mortgage from 25 years to 21 years would increase your payments in exactly the same way as overpaying by £50 each month. Because payment are fixed, this is probably a tougher approach to take. However, it doesn't prevent you from increasing your term again, should you need to, by simply writing to your provider. On the whole, paying off your mortgage early is reckoned to offer one of the best risk-free rates of return around. By making overpayments to your mortgage of around 6%, your money would be working harder than if you had invested it into a savings account with 7% earnings.5% for a basic-rate taxpayer. For a higher-rate taxpayer, this risk-free and tax-free rate is equivalent to 10%, which is practically unbeatable! Many people forget that even though we sign up for a 25-year mortgage term there is no earthly reason why we have to stick to this. If you have any extra cash each month, using it against your mortgage can make a huge difference and it can save you thousands of pounds in interest each year. Good luck on removing that mortgage millstone from around your neck! Free Article Source: http://www.za77.org About The Author: The Motley Fool can help you sort your mortgage facts from mortgage fictions, and we’ll give you the tools to compare mortgages online, helping you find the best - and most affordable - mortgage for your needs. Compare mortgages online and find the best deal for your needs. |