Save Money On Your Mortgage After It Begins - Step 3

Note: It's amazing the amount you can save just by making small mortgage overpayments every month. And that's not all, it will also cut years off the length of your mortgage.

Make Overpayments On Your Mortgage Each Month

Making larger monthly payments than is necessary will also allow you to pay off your mortgage in a shorter period and save substantial amounts of money. These sample figures should illustrate the savings that are possible.

These figures are based upon a $100000 repayment mortgage with an interest rate of 4% over an initial term of 25 years.

Monthly Repayment $527.84 $554.23 (+5%) $580.62 (+10%) $633.41 (+20%) $659.80 (+25%) $686.19 (+30%) $738.97 (+40%) $791.76 (+50%) $844.54 (+60%) $897.32 (+70%) $923.72 (+75%) $950.11 (+80%) $1002.89 (+90%) $1055.68 (+100%) $1583.52 (+200%)

Total Term 25 years 0 months 23 years 0 months 21 years 5 months 18 years 8 months 17 years 7 months 16 years 8 months 15 years 0 months 13 years 8 months 12 years 7 months 11 years 8 months 11 years 3 months 10 years 10 months 10 years 1 month 9 years 6 months 5 years 11 months

Total Paid $158352 $152967.48 $149219.34 $141883.84 $139217.80 $137238.00 $133014.60 $129848.64 $127525.54 $125624.80 $124702.20 $123514.30 $121349.69 $120347.52 $112429.92

Potential Saving n/a $5384.52 $9132.66 $16468.16 $19134.10 $21114.00 $25337.40 $28503.36 $30826.46 $32727.20 $33649.80 $34837.70 $37002.31 $38004.48 $45922.08

These potential savings in the right hand column are certainly not to be ignored. Increasing the monthly repayment by just 5% can save over $5000 and knock two years off the length of this particular millstone.

But these figures are based on the specific details that I gave above (i.e. $100000, 25 years, 4% interest etc.). The savings can be even more spectacular if the mortgage interest rate is higher.

On the other hand, if you’d prefer you mortgage to last a certain number of years, here is an illustration of the amount that you’d have to pay each month. I have used the same details as above (£100000, 4% interest etc).

Term 25 Years 23 Years 21 Years 19 Years 17 Years 15 Years 13 Years 11 Years 9 Years 7 Years 5 Years 3 Years 1 Year

Monthly Repayment $527.84 $554.75 $587.18 $626.87 $676.39 $739.69 $823.12 $937.67 $1104.10 $1366.88 $1841.65 $2952.40 $8514.99

Term 24 Years 22 Years 20 Years 18 Years 16 Years 14 Years 12 Years 10 Years 8 Years 6 Years 4 Years 2 Years

Monthly Repayment $540.69 $570.18 $605.98 $650.20 $706.00 $778.35 $875.53 $1012.45 $1218.93 $1564.52 $2257.91 $4342.49

Once you’ve implemented the techniques on this site, you could use the money that you save to pay extra into your mortgage each month. Here’s what to do: Write to your lender saying that you wish to increase your monthly mortgage repayments. You then have a choice.

First, you could ask them to calculate the size of the repayments if the term of the loan was reduced to a certain length of time (like the table directly above). Perhaps you’d prefer your mortgage to be repaid within 20 years rather than 25 years.

Second, you could tell them the amount that you want to overpay each month, and ask them to provide you with a new redemption date.

But whatever option you select, confirm three things before you proceed.

1) Get your lender to confirm the new position in writing. This should include the new monthly payment, the interest rate and the new redemption date.

2) How often will interest on the loan be recalculated? This position is exactly the same as with the repayment of a lump sum. If possible make sure that the interest on your mortgage account is recalculated daily, so that any overpayments will be instantly applied to reduce the amount of interest due.

If your account only credits payments monthly or even worse, annually, save your overpayments in a bank account and transfer them to your mortgage account just before the date when the payments will be credited.

3) Watch out for any restrictions or penalties that will be imposed for altering the terms of your mortgage. Most lenders will allow monthly overpayments to be made without penalty. But check before you proceed!

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