If you have a bit of spare cash left at the end of the month, it could be worth adding a little extra on top of your normal contractor mortgage monthly repayment.
The Co-operative Bank and Britannia are actively encouraging people to do just that and are allowing mortgage overpayments of up to 50%.
The majority of mortgage lending institutions only allow overpayments up to 10%, but even that is worth doing as the long-term savings add up.
If you pay an extra £50 a month off a 25 year repayment mortgage of £150,000, with an interest rate of 3.75%, you would not only save £8,800 in interest payments, you would also clear your debt two years and five months sooner.
Up that extra repayment to 10%, or £77, and the savings become £12,795 and three years and seven months. And if you can afford to pay an extra 50% every month you will save a massive £38,991 in interest and own your home outright 11 years and two months sooner.
Savings accounts are offering low interest rates at the moment due to the low Bank of England base rate. In fact, the majority of savings accounts will actually erode your savings rather than increase them in real terms. It therefore makes sound financial sense to pay extra off your mortgage if you are in a position to do so.
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