Should I Pay Off my Mortgage Early or Invest?

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Is overpaying on your mortgage worth it?

An Example of Overpaying a Mortgage

Should I overpay my mortgage?

Whether a first time buyer in Manchester who’s looking to put their foot onto the property ladder, thinking of moving to Manchester or looking to remortgage for home improvements, overpaying, even by a small amount, can make a big difference in the amount on the interest you pay back over your mortgage term. The earlier you start overpaying, the better the effects of your extra payments.

Is overpaying on your mortgage worth it?

Some homeowners choose not to down this route, and some cannot afford these additional payments. Sometimes it can come down to life gets in the way. In any case, overpaying is the ideal thing to do when you take out a mortgage, but in reality, there’s always something new and flashy we’d instead invest our money on rather make an extra payment on the mortgage.

The issue seems more likely just to be remembering to overpay your mortgage. It’s not something we imagine comes into your mind too often either, especially when your mortgage term is almost up.

Some people hope to overpay to retire early. If you feel like making additional payments, our recommendation is to set up a payable standing order to your lender each month. Set it up to go out on the same day as your regular mortgage payments.

An Example of Overpaying a Mortgage

Suppose your monthly mortgage payment is £450 per month and goes out on the 2nd of each month. You can afford an extra £85 per month and want to put that towards your mortgage payments. Set up a standing order of £85 to go out to your lender on the 2nd of each month too.

One of the perks of this is your mortgage payments will then total at £535, and because it’s going out as a regular payment, this will feel and later become the norm for you. Another perk is that whereas the receiver controls a direct debit, standing orders, the payer is in total control.

The good news is if you have a financial emergency and don’t want it to go out this month? Simple, all you need to do is log into your online banking and cancel the payment.

Whilst it would be a shame to have to stop making additional payments, at least you’ll receive those benefits thus far; depending on the lender, you may even be allowed to arrange reduced monthly costs or take a ‘mortgage payment holiday’ if you’ve been overpaying for some time. It’s essential to check with lenders, though, if you’re looking to do this; otherwise, it could negatively affect your credit report.

Overpaying is a great habit to have, but it’s not obligatory. If you don’t feel the need to, you don’t have to. That said, shaving off a year or two off your mortgage term will be something you’ll benefit from significantly.

Date Last Edited: December 11, 2023