Mortgage overpayments

A Junior ISA is specifically designed to save for children. This allows parents, godparents, friends or even the child themselves to save money tax-free, in the name of the child.

The savings limit for this tax year is £9,000.

The money cannot be accessed until the child turns 18, at which point it reverts to an instantly accessible stocks and shares ISA in their name.

I like Junior ISAs, even if you’re only saving modest amounts of money, because they engage children and teach them about the process of saving and investing, regardless of your own practices as an adult.

In addition to saving into a Junior ISA, a child of any age can have their own pension.

Up to £2,880 can be paid into the pension each year and it will immediately receive a 25% bonus tax relief on the payment up to £720.

All of the money saved will grow tax-free until the child retires, which is currently from the age of 57.

Let’s say you have a £200,000 mortgage at 2.5% over a 25-year term. Your repayments would be around £890 per month.

If you overpaid by just 10%, or £90 per month, you’d reduce your mortgage term by a total of three years and save yourself more than £9,000 in interest.

If you committed to an overpayment of £1,000 per quarter, it would save you over eight years on your mortgage term and a whopping £24,500 in interest payments.

But, before you start on your mortgage repayment plan, check with your mortgage lender first – some restrict the amount you can repay without incurring penalties.

When 13 goes into 12

Almost all mortgages are set up on a monthly payment in arrears basis, but what if you paid your mortgage fortnightly?

If you paid half after the first fortnight and the second half two weeks later, you’d pay 26 half payments in the year – 13 full payments, effectively one extra month. Based on the example above, you’d save almost £8,000 in interest and shave more than two years off your mortgage term.

The 40/40/20 rule

If you get into the enviable position of paying off all your unsecured debts, take your surplus money after outgoings and allocate it 40/40/20:

40% goes to overpaying your mortgage

40% goes into your retirement plan

20% goes back to you to enjoy today

You need to establish good money habits that you can continue for years – and paying back money to yourself allows you to make the most of life, rather than waiting for retirement to have fun.

This is important because time is running out for all of us.

We don’t know how many more tomorrows we’ll have, but we also don’t want to

retire broke.