Let’s find out what a mortgage overpayment calculator is before we go any further.
Although a spreadsheet or special software would work most overpayment calculators come on peoples websites.
You enter some figures from your mortgage and it spews out some figures that tell you what cash savings you could make and how long in years you could knock off.
Many people fail to realise (or are not told) that the usual 25 year terms aren’t fixed. If you can afford to pay extra you can reduce this by years. If you can afford to pay extra you should.
What the calculator will tell you is how many years you could shave off and how much cash you could save by paying a set amount extra each month.
Quite often the savings are jaw dropping. The best bit is the savings aren’t the lenders but yours.
Back to the title question, what will it do for you? This all depends on your current situation.
Mortgages are many and varied. Not least in the amount of money borrowed. Nevertheless making a few overpayments can bring the lengths down. Which is good news for you.
Using a mortgage of 100 thousand and a 5% interest rate over 25 years as an example. If you could afford 100 extra each month you can bag yourself an extra 20,000 and finish the mortgage in less than 19 years.
If that was me I would definitely try to pay that extra each month. How about you?
On that same example but only paying 50 extra could still knock 3.6 years off and save you in the region of a very handsome 12k. Not bad.
Also, what you may not realise is that you pay nothing for the years you’ve knocked off. 6 years in the first example.
This means you don’t pay, but save another 40 thousand over the last six years.
If you can’t afford or don’t plan to make long term payments then at least try to make some extra payments early on. This early overpayment can compound nicely later on making hefty savings.
If you’ve got a mortgage then you really should do yourself a favour and have a go with a mortgage overpayment calculator. Using your individual figures you could be pleasantly surprised at the result.
Mind you, your lender won’t want you to know all this!
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