A lot of people don’t realise but the standard 25 year mortgage term isn’t fixed. It’s not set in stone. If you won the lottery would you keep the mortgage for the full 25 years? I very much doubt it.
Imagine your payments every month were 500 for aguments sake. What would happen over the 25 years if you paid an extra 10 per week? So your monthly payment is 540 or thereabouts.
Let me spell out a quick example. We’ll keep figures nice and round for ease of calculations. 100,000 mortgage over 25 years at (say) 5% interest. Your monthly payment would be in the region of 580 for 25 years which is a total payback of around 175,000.
Now, using the same figures we would pay just 20 per month extra to make a rounded 600 a month. Our new total payback would fall to just under 170,000 we save an extra 5 thousand. And we shave a year and a half off the 25 years.
I know it doesn’t sound an awful lot over 25 years but using a mortgage overpayment calculator we can play around with the figures and see what happens if we could pay just a little bit more.
If we overpayed by 50 every month we would get these results.
If we use the same example of 5% interest on a 100,000 mortgage and overpayed 50 every month we could knock just under 4 years off and save over 12 grand.
The power of using a mortgage overpayment calculator can show you at the ouset just how better off you could be. It allows you to plan ahead for your future, not the lenders!
Another example using bigger payments than we’ve used so far.
We’ll use the same examples to keep things right. 25 years with 100,000 borrowed at 5% and paying 100 extra per month. We end up shaving over 6 years off the length and over 20 thousand. That’s 20 grand in your pocket not theirs.
An extra 100 per month isn’t easy you say. And over 18 years it’s an extra 23 thousand you’ve shelled out in overpayments.
Considering you won’t have to pay anything for the next 6 years you will have at least 680 every month to yourself. Nice sum of money.
You might be shocked at the amount of savings you can make when you play with a mortgage overpayment calculator.
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