A mother of two is successfully working towards saving £20,000 and shortening her mortgage term by three years through the utilization of a free mobile application.
Eleanor and her spouse recently upgraded to a larger residence following the sale of their initial property. Rather than feeling burdened by the increased mortgage, the couple opted to make additional payments towards it.
In 2022, Eleanor began utilizing Sprive when interest rates were escalating rapidly, taking advantage of the lower rate she was on at the time. Sprive is an app that links to your bank account, monitoring your expenditures and aiding in the allocation of affordable mortgage overpayments.
By setting minimum and maximum payment thresholds, individuals can avoid incurring early repayment penalties. Most lenders typically allow up to a 10% overpayment of the outstanding balance annually without any charges, although this can vary, necessitating thorough review of mortgage terms.
Additionally, Sprive offers the opportunity to acquire gift cards from select retailers, earning a percentage cashback that can be directed towards mortgage overpayments. Eleanor frequently uses Sprive to obtain gift cards for major grocery purchases at Tesco and M&S, converting the cashback into mortgage contributions.
Her consistent and manageable approach has positioned Eleanor to reduce her mortgage term by three years and save £20,000 in interest. Looking ahead, she aims to intensify her overpayments once childcare expenses decrease, with the objective of becoming mortgage-free sooner.
The app collaborates with various lenders such as HSBC, Lloyds, Barclays, and others, and operates under the regulation of the Financial Conduct Authority (FCA). Making surplus payments on your mortgage can result in substantial long-term savings.
According to data from Moneyfactscompare.co.uk, an individual with a £250,000 mortgage over 25 years at a 5% rate could shorten their term by nearly three years and save £25,382 in interest by overpaying £100 per month.
Before prioritizing overpayments, it is advisable to settle high-interest debts and establish an emergency fund equivalent to three to six months of essential expenses. Confirm that any overpayment directly reduces the principal debt owed, rather than solely lowering monthly payments.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, emphasizes the importance of realistically assessing affordability for overpayments to prevent reliance on costlier forms of credit. Mapping out a budget plan can help anticipate expenditure fluctuations and adjust mortgage overpayments accordingly.