When It Comes To Mortgage Overpayments, You've Never Had It So Good. Are You Taking The Advantage?
When It Comes To Mortgage Overpayments, You've Never Had It So Good
. Are You Taking The Advantage?The UK recovery is slowly beginning to pick up steam, however do not expect a smooth and easy climb, there will be multiple setbacks before we finally get there.If we're ever going to reach the 'promised land' again people will need to stay cautious and not revert to the reckless ways that caused this mess in the first place. That in essence, means keeping firm control of cash flow and personal budgets and seeing where savings can be sustained.Such a microscopic look at our own personal finances might be just what the doctor ordered. Slashing costs that, when we really think about them; we don't really need to be paying, but which of these costs to keep or cut is the hard part of the decision.Before slashing essential costs, lifestyle expenditure should be first to see the axe, no matter how much we don't want to. For instant savings, reducing or culling spending on smoking and alcohol will make a large difference, cutting back on trips to the beauty salon or going for a run instead of paying for the gym will soon add up into serious cash. Only willpower is the enemy here, keep focused and don't give in to temptation, though the savings made should boost your willpower when you see your bank balance at the end of the month!Interest rates should never be forgotten about and it's hard not to at the moment. With the Bank of England's base rate at the historic low of 0.5% (but not for much longer) it has been a boon to homeowners up and down the land with lower mortgage repayments being the result. Yet not everyone has accepted these lower payments, many people have in fact chosen to pay as much as they can monthly, but why?The banks and building societies have made the surprising step of making it much easier to overpay on a mortgage by increasing the rate for before penalty charges occur. For almost all institutions, the threshold used to be 10% before penalty charges kicked in; now many of them have increased it to 20%.If 20 per cent is considered generous, then the 50 per cent being offered by the Co-op bank and Britannia building society is out of this world! Quick calculations will show the savings that could be made by making a regular on top payment to your mortgage will slash the years right off, and thousands of pounds in interest to boot.The Bank of England's base rate has remained at 0.5% since March 2009, but inflation has been rising and is now at worrying levels, therefore resulting in interest rates rising very soon. This is going to put pressure on homeowners with tracker mortgages as rising mortgage repayments are coming down the hill, so making overpayments now is strongly recommended.While some mortgage lenders do allow overpayments to be withdrawn in emergencies, expect heavy charges for this service. Depending if it's even an option at all, as many mortgage lenders will not allow this option, the few that do are few and far between.While overpayments should be encouraged as a good thing, don't go crazy and end up raiding your savings and emergency fund to take advantage. If you receive a windfall like a bonus or inheritance it makes sense to use this unexpected income to help pay off a mortgage quicker. Experts always urge caution and moderation, excess towards either end of the spectrum ends in financial difficulties, but you never know what could happen next in this roller coaster of an economy.