With mortgage rates rising, making overpayments seems more attractive than ever. If you’ve made the decision to do this, you don’t need extra tools to do so.
To be in a position to do this, you’d use the same steps you’d use to save money and earn more for any financial goal, such as these Fifty Eco-Friendly Ways to Grow the Gap.
In terms of actually making the overpayments, your key steps would be:
- Checking you can overpay on your mortgage and the annual limit
- Confirming with your provider if you’d like the overpayments to reduce the term of your mortgage
- Making the payments via a bank transfer
- Keeping an eye on your mortgage balance through your provider’s app/website or the mortgage statement from them.
However, there are a number of tools that can help with the process of deciding how much to overpay, keeping motivated and even generating a little bit of extra money that can specifically go towards the mortgage!
Here are the ones I like and use. I’ve indicated where there is some kind of referral benefit for me, but none of these have a fee associated with them and one even starts you off with a sign up bonus.
Planning how much you will overpay
The first tool I’d recommend for seeing the impact you can make with overpayments is the Mortgage Overpayment Calculator on the MoneySavingExpert website. By entering a few of your mortgage details (such as your mortgage debt, term and interest) you can then see the impact of different one-off or regular payments.
What I love about this is that it shows you clearly how much you’d save in interest and how much earlier you would be mortgage free. It also generates a useful table comparing your final balance with and without the overpayment. This is really useful if you are planning to make a one-off or regular payment of the same amount and would like to calculate your loan to value ratio in a particular year, so that you can work towards bringing this down to a lower tier before your next remortgage.
If you’d like to model the effect of different overpayments in different months then I’d recommend a free app called Mortgage Payoff Track. This will let you see the effect of different overpayments at different times. For example, if you know you can only afford to overpay by £50 a month while you are paying for childcare, but can increase it to £500 once your kids start school, you can plug in this exact scenario to see when you will have finished overpaying.
The adult colouring-in craze passed me by, although I do love to colour in my progress towards saving goals.
You can make your own tracker, or download one for free.
To show my progress towards paying off the whole house I have a tracker which is a grid where each square represents £1000. I’ve also drawn a floorplan for the house on this so that I can see myself gradually owning the house, room by room.
I also love the trackers that you can download for free on 1000 Hours Outside. These are designed to be used for tracking the time that your family is spending outside. However, for me they are perfect for tracking overpayments because the designs are gorgeous and because there are 1000 units on each tracker you can track smaller payments.
I am currently filling in a sheet that represents my payments going down from £400,000 debt remaining to £300,000. Each little shape is £100 so I get the satisfaction of colouring them in quite often. Even a £25 overpayment is visible and I’m motivated to find the extra £75 to complete the shape.
Last year a nifty little app called Sprive was launched to help people pay off their mortgage faster. The main selling point (although it’s free) is the ai functionality that helps identify how much you could afford to overpay each month. I don’t even use that functionality but I still find it handy for making and tracking ad hoc overpayments. See this post for a full review and referral code for a £5 sign up bonus.
Earning Cashback Towards Overpayments
Accelerate Your Mortgage (referral link) allows you to earn cashback when shopping at certain retailers, such as Aldi, Boots and Ocado. I would say it’s worth using when the cashback rate is higher than other platforms, such as Top Cashback, but it has the disadvantage that the money can only be used towards making extra payments to your lender, and you can only do that in £50 increments. If you don’t spend a lot online, it may be better to use other cashback platforms for the flexibility they offer.
There’s no silver bullet…
The nice thing about these tools is that you can use them whether you have a “set and forget” approach or want to obsessively pore over every stage of your mortgage overpayment journey.
None of them are going to make a huge difference in themselves. The real key – of course – is prioritising overpayments in your budget and maximising the gap between what you earn and spend. However, with a long term goal like this, these types of tools can help to make the difference between taking regular action and letting other projects take over.
I’d love to hear what tools or hacks you use to make the mortgage overpayment journey a bit easier, or more motivating. Please leave a comment below!