Morris decided to overpay his mortgage after getting a pay rise as he wanted to put the extra money to work, and has been able to almost halve his mortgage term because of it.
He explained his overpayment situation on BBC Money Box, stating it has given him “financial headroom”.
Although his capital is low, the high interest rates have not affected him much because he paid the capital down while the interest rates were low. Now that it’s high, he has less capital attracting interest.
He said: “It gives us some financial headroom when the energy bill has gone up we don’t have to worry as we have a big overpayment. We have some security.”
Simon Gammon, Managing Partner of Knight Frank Finance, explained Morris’s situation is a “win-win”.
Mr Gammon explained that overpayments are a really important topic because those who can make overpayments either regularly or and the lump sum can “save literally thousands of pounds of interest and take years of the term of your mortgage“.
He said: “I think a great deal of people are actually not as informed as they could be as to how much money they can save.
“If you’re in a position where you can make significant payments, then it does make a big impact. But even the small regular payments would make a huge difference.”
He gave the following example: If you had a £150,000 mortgage with a 25-year term and you paid £100 extra a month, this can save over you £20,000 of interest and this can take five years off the mortgage.
“It’s a massive saving,” he added.
Those who are still enjoying a low interest rare of one or two percent are the ones who can benefit the most from overpayments if they have the extra cash.
Mr Gammon continued: “I speak to a great deal of people who are sort of still enjoying a mortgage rate of one or two percent and think they don’t need to worry about this as they’ve got another couple of years to go.
“But this is exactly the group that need to be taking action because they have a window in time in which perhaps reduce the impact when their mortgage rate does end and they’re looking for a new rate.”
Before making any decisions, Britons are encouraged to look at the overall picture and check whether they have any other debts they need to prioritise that have higher interest than their mortgage.
Mr Gammon also suggested homeowners look at the mortgage rate they’ve currently got as it’s possible with the environment right now that their money might be better off in a high savings account.
When their mortgage rate comes to an end, then make the reduction, but his advice is just to get in the most informed position and to speak to a lender.
He concluded: “Speak to a broker or your lender and look at your options because savings could be dramatic.”
