Put your house on gains of overpaying

I’m not a fan of keeping money under the mattress, yet for many now’s the time to put it in the roof and floorboards. With savings paying dire rates, often the best safe returns come from overpaying your mortgage - gains may be £100s, £1,000s or even £10,000s.

So CHECK NOW if you should be taking cash out of the bank and giving it to your mortgage lender instead.

Even Tom Daley doesn’t dive like savings rates over the last year – a spit-worthy 0.1% is now common, while a typical standard variable rate mortgage charges over 4%.

If your mortgage rate is higher than you can earn by saving, then mathematically overpaying wins. For example, £1,000 saved at 1% earns just £10 annually, instead use this cash to reduce a 4% mortgage and you save £40 a year, so you’re £30 better off.

And when compounded the impact is enormous. Overpay £250 a month on a 20-year £150,000 4.8% mortgage and you’d clear it six years earlier, saving £27,000 in interest. You can check out your own situation on the mortgage overpay calculator at mse.me/ mortgageoverpaycalc. Do note I said “can” earn by saving not “do” earn – don’t compare your mortgage to a naff savings rate, compare it to the best possible. That’s around 1% in the top bog standard easy access deal, such as offered by nsandi.com , or 3% on up to £15,000 by putting it in the bankofscotland. co.uk ’s Vantage account (it’s a max £5,000, but you can have three accounts, though you need to play a bit to meet the terms) for full help see mse.me/topsavings

Yet before you overpay there are some checks to make… 1 Are there overpayment penalties? Most mortgages allow you to overpay up to 10% of your balance annually.

Yet a few have penalties, and if they do, this kiboshes the gain. 2 Ensure the overpayments shorten the term. Some lenders just reduce your monthly mortgage repayment, so it’s still spread over a long time, hardly saving you owt. Instead ask to keep your current repayments and shorten the mortgage term (this gives you the flexibility to stop overpaying). 3 Always have a readily available emergency fund. Put aside three to six months worth of bills, in case the worst happens. Even if you’ve overpaid a mortgage, if you lose your job, you could face mortgage arrears. 4 If you’ve more expensive debts, repay them first. While a mortgage is likely to be your biggest loan, it might not be the most expensive. If you’ve other debt at higher interest, that costs more, so clear it first.

Overpaying now may also help you to get a cheaper future mortgage rate as it reduces your LTV (Loan to Value – the % of the price borrowed against the total house value) and for each 5% lower that is, down to 60%, mortgages tend to get cheaper. And don’t just take my word for it. Debbie emailed: “I started overpaying my mortgage seven years ago. Saved £18,600 in interest and paid up eight years and three months early. My ex- mortgage payments now go towards a fantastic retirement.”