Overpaying a mortgage 'makes financial sense'

Posted: 28 Nov 2011 12:38:53 GMT

People could save around £42,000 by overpaying their mortgage.

Homeowners who choose to overpay their mortgage are likely to find such an approach makes sound financial sense in the long run.

This is because new research by First Direct has revealed a person who pays an additional £300 a month on a typical 25-year home loan could find themselves £41,665 better off as a result.

In addition, the study showed those who pay back more than they need to could find they come to the end of their agreement 12 years early.

Richard Tolchard, senior mortgage product manager at First Direct - which is operated by HSBC - said borrowers can be "better off paying down their debt ahead of saving as historically the average rate of interest paid on a mortgage has been consistently higher than the average amount earned by saving".

He added offset mortgages could offer the bets of both worlds for those looking to access their savings and reduce the overall interest they pay.
 

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