Martin Lewis reveals how you could save tens of thousands of pounds by overpaying mortgage

Martin Lewis reveals how you could save tens of thousands of pounds by overpaying mortgageThe Martin Lewis Podcast, Spotify

Transcript

00:00If there's an odd amount, say I have £1,525.36p, then that's £25.36p put towards the mortgage budget depending.

00:11We have saved £35,000 in interest and knocked 10 years off our mortgage, which was originally 27 years, by doing this.

00:24We're continuing to plan to get rid of the mortgage altogether ASAP.

00:29That's the impact that overpaying your mortgage can have. £35,000 of interest.

00:35And I put that in my weekly email and I've already had messages from people saying,

00:39£35,000? That's nothing. Let me tell you how much I saved by overpaying, which is why we're discussing it.

00:45I wish someone had told me this a long time ago. Stephanie is on the line. Good afternoon, Stephanie.

00:50Hi.

00:51What would you like to ask Martin?

00:53I've got about 10 years left on my mortgage and I'm currently on a fixed rate of 3.84% until the end of next year.

01:02At the moment, my savings account interest rate is just over 5%.

01:06So any spare money I've been putting into my savings account instead of overpaying my mortgage,

01:11am I doing the right thing or in the long run, am I still better to pay the mortgage off earlier?

01:16So first question, are you paying tax on those savings?

01:20No.

01:21£35,000 of interest a year. So then that's a true rate of 5%-ish.

01:25Yes.

01:26And it's worth me saying to everybody out there, when I say, is your mortgage rate higher than you can earn on savings,

01:31that doesn't mean that you do earn on saving.

01:33So you should always, it's very easy to ditch and switch savings.

01:36The top easy access pay over 5% right now. The top fixed rates are paying over 5% too.

01:42So if you've got a terrible rate on your savings, don't compare it to that.

01:45Ditch those savings unless it's locked away in a fix.

01:47So my answer to you is yes, you're absolutely right.

01:51The only advantages that you might have that aren't rate related come to when you remortgage.

01:57If you have less than 60% equity in your house, so you're going to be borrowing over 60%,

02:05then reducing your mortgage borrowing can potentially improve the mortgage rate that you get.