Today, more and more people are clearing their mortgage at a much faster rate – thanks to low interest rate and various flexible mortgage products made available by the lending institutions.
Currently, almost all lenders offer the facility of limited overpayments to its customers. But there are some mortgage companies that have specific products designed for the customers that allow them to pay more than the minimum. Some companies even allow their customers with the facility to overpay any amount.
One such product that allows overpayment without any penalty is flexible mortgage. Under this scheme, which has been there for the last 10 years, customers are allowed to overpay yearly 10 per cent of their mortgage.
Building society says that if a customer overpays £65 a month on a loan of £80,000, he can easily clear his loan within five years and save almost £15,000, taking into account the interest rate of 5.99 per cent.
Offset mortgage is another way of dealing with early mortgage redemption. Started in 1998, offset mortgage links the loan to customers savings and current account so that the portion of the loan is reduced on which the consumer pays interest. For instance, you have taken a loan of £150,000, and have a saving of £50,000 with monthly salary of £2,000; you’ll have to pay charges on £98,000 of the loan and not £150,000. This will save you almost £90,000 over the course of a 25-year loan, keeping in mind the interest rate of 5.95 per cent. Since interest rates on offset deals are generally higher compared to other schemes, it becomes important to have huge amount of savings in order get your money's worth.
Newcastle Building Society meanwhile has launched a new product whereby parents can use their savings to pay-off their children’s mortgage.
However, the best option is to renegotiate the mortgage term with your lending company, which they don’t mind, but at times charge a small fee. By doing so, reducing a 25-year loan to 15 years, your payments will certainly increase but you will be released from the headaches.
Posted
on : Sat, 12 Mar 2005 00:00 GMT | Mortgages News
By : Chris Rowe
|
