Now, more than ever, it’s time that homeowners do whatever they can to lower their mortgages.
With the rise in European interest rates, it is expected that higher mortgages bills will be quick to follow.
Homeowners are beginning to get more and more comfortable as economic recovery since the recession has been tracked as going in such a positive way.
By overpaying on a mortgage the borrower will knock tens of thousands off of their mortgage easily. And they would dramatically cut back on the time it takes to finally become mortgage free.
According to Dowling financial, by an increase of 100 euro per monthly payment, the average mortgage would be paid off three years earlier and save nearly 12,826 euro in interest.
A small increase in payments leads to quite a substantial savings. Probably an effort worth it to most borrowers.
Those that should keep their guard up and remain mindful are those with a fixed rate mortgage.
Overpaying on fixed-rate mortgages could cause borrowers to be hit with an early redemption fee. A charge that could potentially be large and take a substantial part of the savings that one would get from overpaying anyways.
Some banks do however have ways for one to avoid early redemption fees, as long as certain limitations are adhered to. These banks include KBC, Ulster, and Bank of Ireland.
Commonly, the borrower is allowed to make overpayments on the top 10% of the overall loan each year or each month without causing a break fee to be initiated.
Certain banks, however, have an absolute no overpayment policy and the borrower will always be hit with the break fee if they chose to overpay on their mortgage at any given time.
Overpayments should produce highest payments by the lowered interest rates a borrower is charged. It is likely the borrower’s responsibility to draw that to the bank’s attention and ask for the change to be initiated immediately.
If done so, everything should be settled quickly and easily, giving the borrower the best possible benefit available.
The best possible scenario for mortgage borrowers would be to clear the entire mortgage in one lump-sum.
Obviously not an easy thing to do but should a borrower come into some money, clearing a mortgage that has 150,000 euro left to be paid with a 4.5% rate, would ultimately save the borrower 35,000 euro in interest fees alone.
It is obviously strongly advised that anyone borrowing money of any kind will pay off the loan with the highest interest rate first. Mortgages do after all tend to have some of the lowest rates of any loan types.
Overall there is a vast amount of room for borrowers to save on their loans and the time left to repay their loans. It may simply take some planning and asking of their lenders.
If a borrower sets a goal to save, the goal is typically not so far out of reach and can, ultimately be done.