Overpayment

A term used in mortgage lending where a lender makes voluntary repayments at more than the contracted level.

You continue with your normal monthly mortgage repayment but choose to pay extra on top of the agreed sum. By overpaying on your capital & interest mortgage each month, you could save yourself hundreds or even thousands of pounds. You can also reduce the term you have to pay your mortgage for. Even the smallest amount of payments can make huge differences in the long run. However, while overpayments seem like a good idea in theory, it essentially depends on the terms and conditions of an individual policy. Some mortgage polices may not allow you to make overpayments at all, or there may be a certain period from when you can start making overpayments, some penalise you for making overpayments and some policies cap the amount of overpayments you can make.

If you’re unsure of your options, ask your mortgage lender or talk to a good mortgage broker. Before you think about doing this, make sure you obtain confirmation in writing that this will not give rise to an early repayment penalty and that the agreement is flexible in case you cannot overpay one month.

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